TOKYO, Sept 14 The Bank of Japan plans to make
its controversial negative interest rate policy the centrepiece
of future monetary easing, promising to weigh further cuts as
expansions to asset buying near their limits, the Nikkei
newspaper reported on Wednesday.
The central bank may make its massive government bond
purchases more flexible but maintain its pledge to increase its
holdings at an annual pace of 80 trillion yen ($780 billion),
the paper said without citing sources.
The plan will be part of the BOJ's comprehensive assessment
of its stimulus programme, which combines negative rates with a
massive asset-buying programme, at next week's rate review.
Such changes would underscore a growing concern within the
central bank over its dwindling policy options, with more than
three years of aggressive bond purchases having dried up market
liquidity and failing to accelerate inflation to its 2 percent
Whether the BOJ will actually deepen negative rates next
week will depend on yen moves and the board's debate on the
state of the economy, the Nikkei said.
By shifting its focus on negative rates, the BOJ will have
more options to draw on in case a slower-than-expected U.S.
interest rate hike triggers a yen spike, it said.
It added negative rates to its asset-buying programme in
February in a renewed effort to push up prices. But the move has
failed to address unwelcome yen rises and drew criticism from
financial institutions for squeezing already thin margins.
BOJ officials have also become increasingly wary of the
costs of negative rates, which have flattened the yield curve
more than they had expected and raised concerns that it would
impair financial intermediation.
BOJ Governor Haruhiko Kuroda has said the bank will
scrutinise the pros and cons of each of its tools in the
comprehensive assessment due at the Sept. 20-21 rate review.
Sources have told Reuters that the BOJ is studying several
options to steepen the bond yield curve, including ways to cut
short- to medium-term bond yields while pushing up super-long
yields from undesirably low levels.
The BOJ may consider reducing purchases of government bonds
with maturities longer than 25 years to push up super-long
yields and give financial institutions a better environment for
earning returns, the Nikkei said.
Purchases of shorter-term bonds could be increased to
compensate, as some claim overall buying should be kept at the
current pace, the paper said.
($1 = 102.5400 yen)
(Reporting by Leika Kihara; Editing by Alan Crosby)