The Bank of Japan should use a combination of a more-negative benchmark rate and enlarged asset purchases "sometime, before long" to help the economy, according to Etsuro Honda, an adviser to Prime Minister Shinzo Abe.
"But maybe not next week," when the BOJ next meets to decide policy, Honda, 61, said in a phone interview Thursday. "The BOJ is carefully watching the reaction from market participants" from its announcement of negative rates in January, "so another round of monetary policy expansion will take place a bit after that."
The unexpected move to charge commercial banks for a portion of the cash they park at the central bank roiled financial markets and continues to reverberate through the money-market industry. While lower rates would typically cause a cheaper currency, instead the yen has climbed — by 4.5 percent against the dollar, contributing to a drop in Japanese stocks. The shift has made it cheaper for Japan to borrow, with 10-year government bond yields now negative at auction out to 10-year maturities.