Kuroda Denies That Shadow Rate Shows BOJ Is Without Ammunition
Kuroda Denies That Shadow Rate Shows BOJ Is Without Ammunition
(Bloomberg) -- Whether it’s the “reversal rate” or the “shadow rate,” Haruhiko Kuroda continues to push back against the notion that the Bank of Japan can’t go any further to stimulate prices.
BOJ watchers are well accustomed to hearing about the reversal rate: the interest rate level at which additional stimulus starts to harm the economy overall. The BOJ governor has insisted for months that Japan is not at that point and that the central bank can dig deeper into its easing toolkit to support prices if needed.
On Friday the focus turned to the shadow rate, a measure of where interest rate levels would be if the effect of unconventional easing measures such as bond-buying is factored in. Speaking in parliament, Kuroda acknowledged that the shadow rate was well below the -0.1% short-term interest rate set by the BOJ. But he denied that meant he no longer had any ammunition to go lower or take other easing action.
BOJ policy has been more accommodative than the Federal Reserve and the European Central Bank, but the bank still has “ample room” for easing, Kuroda said.
The BOJ meets Oct. 30-31 amid some expectations it will add stimulus after the bank last month called for a review to see whether the global slowdown is hurting Japan’s economy and slowing price momentum.
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, Jason Clenfield
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