Members of the Bank of Japan Policy Board raised concern about the side effects of adopting a negative interest rate at the central bank’s January meeting, a summary of the minutes showed Monday.
Four of the board’s nine members — Sayuri Shirai, Koji Ishida, Takehiro Sato and Takahide Kiuchi — opposed the step, according to a statement the BOJ released afterward.
At its meeting from Jan. 28 to 29, the BOJ decided to charge a negative interest rate of 0.1 percent on some of the accounts financial institutions keep at the bank.
One of the policymakers — their identities are not disclosed in the summary — supported the radical measure, saying the BOJ should set the country’s first negative interest rate ever “to maintain momentum toward achieving the price stability target of 2 percent.”
BOJ Gov. Haruhiko Kuroda, speaking at a news conference after the policy review, said the fresh step scheduled to be taken on Feb. 16 would stir personal consumption and boost investment.
But one policymaker said that there is limited room for private-sector borrowing rates to fall further, despite an additional drop in government bond yields, and that business fixed investment is unlikely to improve.
Another member said: “The introduction of a negative interest rate will have larger side effects on the functioning of financial markets and the financial system than positive effects on the real economy.”
“Thus, in this policy measure, the side effects outweigh the positive effects,” the member concluded.
The BOJ’s move stunned the markets, with the Nikkei stock index briefly surging nearly 3 percent. The dollar also jumped against the yen, to the mid-121 zone from the mid-118 zone at one point, during Tokyo trading on Jan. 29.
“I am concerned that financial markets will expect further cuts in the interest rate into negative territory,” one policymaker said.
Many of the members feared potential “confusion” from the move, with one saying the measure “could reduce the monetary easing effect.”
Another said the introduction of a negative interest rate could lead to a “competition” with other central banks that have adopted similar measures.
The summary was the second of its kind released by the BOJ following one in January intended to improve its communications on monetary policy.