BOJ's Wakatabe Wants to Get Out of Negative Rates as Soon as Can

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Bank of Japan Deputy Governor Masazumi Wakatabe said policy makers don’t want to continue lower or negative interest rates for a long time.

“In an ideal world, we’d like to reach 2% inflation target and we’d like to get out of this negative interest rate policy as soon as we can," Wakatabe said at an event in New York Thursday. “That doesn’t mean we’re rushing to the exit, but this much is clear, we don’t want to maintain lower for longer to become lower forever.”

Many BOJ watchers expect the central bank to add to its stimulus at the end of this month after calling for a review of whether a global slowdown threatens to wipe out inflation in Japan. Wakatabe, a well-known reflationist, is seen as one of the board members pushing for more action.

The BOJ has indicated greater willingness to ramp up its easing measures amid a global slowdown and moves by the Federal Reserve and European Central Bank to bolster stimulus. Still, the BOJ is wary of the side effects on commercial banks and markets of its massive easing program, which is far larger in scale than the stimulus of any other major central bank.

So action in October is not a done deal. Incoming economic data and developments in financial markets before the end of policy meeting on Oct. 31 will be closely assessed by the bank to see if it really has to move.

“Whenever crisis hits, what we need is policy coordination," Wakatabe said. “Fiscal policy authorities and monetary policy authorities should cooperate to tackle the crisis situation.”

Governor Haruhiko Kuroda has laid out four possible options for boosting stimulus -- cutting negative interest rates, lowering long term rates, expanding asset purchases and quickening the expansion of the monetary base.

Wakatabe, a former economics professor, has supported every decision by the board since taking the position in March last year.

--With assistance from Toru Fujioka and Kathleen Hays.

To contact the reporter on this story: Katherine Greifeld in New York at kgreifeld@bloomberg.net

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

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