BOJ Member Cites Reversal Rate to Push Back Against Easing Steps

(Bloomberg) -- With speculation still bubbling that the Bank of Japan’s next move will be further stimulus, a BOJ board member tried to rule out a lowering of Japanese interest rates, saying they were already close to an unfavorable tipping point.

The board member said rates were approaching the so-called reversal rate, according to a summary of opinions from the June 19-20 policy meeting. The summary doesn’t identify who makes each comment. The member was referring to the level at which lower rates start to hurt the economy more than they benefit it.

Any mention of the reversal rate has an elevated significance in Japan since Governor Haruhiko Kuroda’s first reference to the term in November 2017. His comments then fueled a surge in expectations that the BOJ was getting ready to scale back its massive stimulus program.

The term has again been buzzing among investors and economists in Japan after the BOJ published a research paper on the rate last week. References to the reversal rate by BOJ officials are viewed as an indication the bank is unwilling to lower its policy rates further.

A recent Bloomberg survey showed that a majority of economists expect the BOJ’s next move to be additional easing. At the June meeting, where policy was left unchanged, one member said the BOJ should strengthen stimulus in light of likely easing moves by the Federal Reserve and the European Central Bank over coming months.

Read more: BOJ’s Wakatabe Indicates ‘Reversal Rate’ No Obstacle to Action

Still, the recent report and the reversal rate comment from the meeting may dial back some of those expectations that the BOJ will follow suit.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Paul Jackson, Jiyeun Lee

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