Bank of Japan Deputy Gov. Hiroshi Nakaso said Thursday that expanding the central bank's negative interest rate policy is still a key tool that could be used to pave the way to its 2 percent inflation target, but emphasized the undesirable impact of the controversial measure.
The negative interest rate policy has created several positive effects, including growth in corporate lending, but "the flip side of such positive developments is the growing pressure on financial institutions' profits," Nakaso said in a speech in Tokyo.
Nakaso, who has worked at the BOJ for more than 30 years and is well-versed in its inner workings, said a drastic downturn in lending rates has weighed on the earnings of private financial institutions.