Dissenters warned BOJ negative interest move could fuel global cuts
By Leika Kihara
TOKYO (Reuters) - The Bank of Japan could confuse markets and trigger a global competition to push interest rates deeper into negative territory by cutting its rates below zero, dissenters to the move told a rate review last month, underscoring Governor Haruhiko Kuroda's struggle to push through the radical measure.
At the January meeting, the BOJ unexpectedly cut a benchmark interest rate below zero, stunning investors with another bold move to stimulate the economy as volatile markets threaten its efforts to overcome deflation.
But the decision was made by a 5-4 vote with dissenters arguing that pushing down already low borrowing costs would have few benefits for the economy.
"Japan's economic activity and prices have maintained stable conditions, and the recent instability in financial markets has not been serious. At this moment, the Bank does not need to implement additional monetary easing," one member said, according to a summary of the meeting released on Monday.
Proponents of the move said the BOJ had enough knowledge of the effects of a negative rate policy via the experiences of European central banks, arguing that acting now was necessary with global market turbulence threatening to delay an end to deflation.
But opponents said adopting negative interest rates would discourage banks from selling government bonds to the BOJ to receive cash, potentially exposing the limits of its massive asset-buying programme, the summary showed.
There was also concern that by adding interest rates to its tool kit, the BOJ would face increased market expectations of further rate cuts, the summary showed.
"I am concerned that the BOJ's introduction of a negative interest rate could lead to a competition with central banks in other countries, which already have adopted negative interest rates, to lower interest rates deeper into negative territory," one member was quoted as saying.
The BOJ began releasing a summary of debate at each policy meeting this year in a move to enhance communication with markets. More detailed minutes will be released in coming weeks.
(Reporting by Leika Kihara; Editing by Chang-Ran Kim and Eric Meijer)
