The Bank of Japan is highly unlikely to deepen its negative interest rate without a fresh economic crisis on a massive scale, according to former board member Makoto Sakurai, whose term ended last month.

“The BOJ didn’t lower rates” even at the height of the pandemic shock last year in March, Sakurai said in his first interview since leaving the central bank two weeks ago. “The kind of historic crisis needed to trigger a cut very rarely takes place.”

Sakurai, who was seen as a core supporter of Gov. Haruhiko Kuroda on the nine-person board, also said the introduction of new lending incentives at last month’s policy review hasn’t pushed the bank any closer to taking action on rates.

His remarks indicate the BOJ’s bar for lowering rates is as high as ever and that weak inflation alone won’t be enough to trigger such a move, despite the central bank’s efforts last month to show its readiness to do so. His comments could also strengthen the view among some investors and economists that the BOJ unveiled the lending incentives largely to give the impression it wasn’t dialing back its stimulus.

“The challenge of continuing with easing is the severe business environment for banks that results from prolonged low rates,” Sakurai said, characterizing the review as a way to maintain stimulus over the longer run. “It was extremely important to provide some relief for banks and deliberately set out a mechanism for cushioning the impact of any possible rate cuts.”

The incentives introduced last month reward commercial banks for lending money by paying varying rates of interest on some of their deposits at the BOJ. Under the incentives, a deeper rate would automatically increase the reward for lending money.

The BOJ also decided to buy stock funds in a more flexible manner amid growing criticism it was pushing up equity prices to three-decade highs after becoming the biggest single holder of Japanese shares late last year.

That extra flexibility, combined with the BOJ’s clarification of a wider-than-assumed yield range, has enabled the bank to pare its asset buying, a move viewed as a winding back of stimulus by some economists.

“The BOJ only needs to buy ETFs when financial markets are in panic. Those occasions don’t happen often so purchases are likely to be next to nothing,” Sakurai said. “My view is that ETF buying should be zero or without limit depending on market conditions.”

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