Radford Taylor Partners - BoJ Maintains Stimulus

Radford Taylor Partners - BoJ says shrinking profits could cause banks to curb lending but holds policy steady.

Last week, Japan’s central bank decided to maintain its monetary policy and slightly reduced its inflation predictions in the face of global trade tensions and an uncertain economic outlook, indicating that the Bank of Japan is not planning to rein in its massive stimulus any time soon.

Analysts at Taipei, Taiwan based Radford Taylor Partners, however, say the Bank of Japan issued a stronger caution about greater financial risks than it did three months ago, as years of ultra-low interest rates continued to hurt the profits of banks and warned that it could lead to a decrease in lending to the private sector.

Radford Taylor Partners analysts say ongoing downward pressure on banks’ earnings caused by ultra-low interest rates could destabilize Japan’s financial system.

In a recent quarterly report by the Bank of Japan, the central bank stated that although the risks may not be substantial at this point, it is necessary to monitor future developments.

Haruhiko Kuroda, Governor of Japan’s central bank, said that the Bank of Japan is aware of the impact of its policies on banks who might start to reduce lending if their profits continue to suffer.

He added that the BoJ does not plan to adjust its target of zero percent for 10-year government bond yields.

Analysts at Radford Taylor Partners say the primary goal of the BoJ remains to reach the target of 2 percent inflation as soon as possible.

As Radford Taylor Partner analysts anticipated, the Bank of Japan decided to keep short-term interest rates at minus 0.1 percent and long-term interest rates at 0 percent, indicating that the central bank will likely maintain its monetary policy for some time.

Source: Radford Taylor Partners

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Categories: Governmental Banking

Tags: Bank of Japan stimulus, Radford Taylor Partners, RadfordTaylor


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