IMF says deepening negative interest rates an option for Bank of Japan
By Leika Kihara WASHINGTON (Reuters) - Deepening negative interest rates remains an option if the Bank of Japan were to ramp up stimulus, though any such move must be accompanied by fiscal and structural steps to be effective, a senior International Monetary Fund official said on Friday. Odd Per Brekk, deputy director of the IMF's Asia and Pacific department, also said the BOJ had room to enhance communication by linking its commitment to keep rates low more clearly to its 2% inflation target. 'We think that lowering the negative interest rate remains an option.
By Leika Kihara
WASHINGTON (Reuters) - Deepening negative interest rates remains an option if the Bank of Japan were to ramp up stimulus, though any such move must be accompanied by fiscal and structural steps to be effective, a senior International Monetary Fund official said on Friday.
Odd Per Brekk, deputy director of the IMF's Asia and Pacific department, also said the BOJ had room to enhance communication by linking its commitment to keep rates low more clearly to its 2% inflation target.
"We think that lowering the negative interest rate remains an option. Of course, given stubbornly anchored inflation expectations, a whole package (of steps) is needed, especially structural reforms," Brekk, who is the IMF's mission chief of Japan, told Reuters on the sidelines of the IMF and World Bank fall meetings.
The BOJ deployed an aggressive monetary easing programme in 2013 as part of the "three arrows" of Prime Minister Shinzo Abe's "Abenomics" stimulus policies, which were aimed at pulling the country out of deflation.
While the monetary easing and fiscal spending helped stimulate growth, critics say Abe failed to deliver on the structural reforms needed to boost Japan's growth potential, such as labour market reforms.
Brekk refrained from commenting on whether the BOJ could or should ease monetary policy at its rate review this month.
Markets are rife with speculation the BOJ could top up stimulus at its Oct. 30-31 meeting, after it signalled last month the chance of imminent action by warning of escalating overseas risks.
BOJ Governor Haruhiko Kuroda has said deepening negative rates is among key options if the central bank were to ease.
But the move is highly controversial as it would put further strain on financial institutions' profits and could discourage them from boosting lending. Some analysts warn that further rate cuts could push some regional banks into financial trouble.
Brekk said the plight of regional banks must be dealt with as a structural problem that can be addressed by strengthened oversight and supervision by bank regulators.
"What we are recommending is to deal with those issues through changes in business models. For regional banks, it may perhaps involve consolidation, though it may be difficult for many reasons," he said.
Under a policy dubbed yield curve control (YCC), the BOJ guides short-term rates at -0.1% and the 10-year government bond yield around 0% to achieve its elusive 2% inflation target.
It has pledged to keep rates at current ultra-low levels for an extended period of time, at least until around spring next year.
(Reporting by Leika Kihara; Editing by Paul Simao)
This story has not been edited by Firstpost staff and is generated by auto-feed.
By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.