The Bank of Japan kicked off a two-day policy meeting Monday to examine the effects of its surprise January decision to adopt a negative interest rate.
BOJ policymakers are expected to discuss financial developments since the nine-member board voted in favor of imposing a 0.1 percent charge on part of the reserves that financial institutions hold at the central bank.
Since the introduction of the negative interest policy, some banks have cut mortgage rates and deposit rates, while lender shares took a hit. The yield on 10-year Japanese government bonds has entered negative territory.
Although some analysts question the effectiveness of the latest move, BOJ Gov. Haruhiko Kuroda said earlier this month that the effects of its “powerful” policy were overshadowed by excessive risk aversion in financial markets. Kuroda also said the BOJ would carefully monitor how the policy fed into the economy.
It should have a positive effect on households and companies, Kuroda said, as annual wage talks between management and labor unions swung into top gear amid calls by Prime Minister Shinzo Abe for firms to boost wages.
Japan registered negative growth in the October-December quarter, reinforcing the view among analysts that the world’s No. 3 economy has ground to a standstill.
It bodes ill for an economy bracing for another consumption tax hike in 2017 and could prompt more calls for further stimulus, with the BOJ seen as facing an uphill battle to hit its 2 percent inflation target.
The meeting comes amid concerns about the global economic outlook.
Last week, the European Central Bank decided to ease its monetary grip further by cutting rates and increasing asset-buying in its latest effort to revive growth and boost inflation.
The U.S. Federal Reserve is scheduled to start its two-day meeting Tuesday, with the focus on the pace of further interest rate hikes.