Bank of Japan Gov. Haruhiko Kuroda has surprised the market again by introducing a negative interest rate, but the decision indicates the central bank has been pushed into a corner in its battle against deflation.
The new easing measure, which one analyst likened to a "powerful drug," could have both positive and negative effects. It gives the central bank more room to ease but also runs the risk of turning into a poison and harming financial institutions.
"By adding an option for easing from the perspective of interest rates, we will make full use of easing measures with three dimensions — quantity, quality and interest rates," Kuroda told a news conference Friday after a two-day policy meeting.