Kuroda’s negative rate surprise shocked his own BOJ board, minutes show
FILE PHOTO: A security guard stands in front of the Bank of Japan headquarters in Tokyo, Japan, December19, 2025. REUTERS/Manami Yamada/File Photo
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TOKYO, July 15 : The Bank of Japan’s shock introduction of negative rates in 2016 drew intense criticism from within the board with some blasting it as half-baked and a risky move that could trigger a currency war with Europe, policy meeting minutes showed on Wednesday.
The decision, which was approved by a 5-4 vote, highlighted the resistance former BOJ chief Haruhiko Kuroda faced in pushing the limits of monetary policy and the fragmentation that emerged in the board in battling economic headwinds.
After massive asset buying failed to fire up inflation, the BOJ unexpectedly cut a benchmark interest rate below zero in January 2016 in hope of reflating growth and countering sharp yen rises that were hurting the export-reliant economy.
Global equities jumped, the yen tumbled and sovereign bonds rallied after the BOJ’s decision to follow the aggressive policy pioneered by the European Central Bank (ECB).
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In a rarity in the consensus-favouring board, dissenters heaped concern over Kuroda’s proposal to charge a 0.1 per cent interest on a portion of financial institutions’ deposits at the BOJ.
Board member Takehiro Sato warned the move could draw Japan into a rate-cut competition with the ECB to devalue their currencies, according to the full account of the deliberations.
“It’s wise to avoid falling into such a futile game,” Sato said, warning of the strain negative rates could inflict on Japan’s banking system.
Commercial banker-turned board member, Koji Ishida, also said attempts to push down already low rates would do little to boost lending and capital expenditure.
The minutes indicated how most on the board were left in the dark as Kuroda and his staff prepared the plan.
“It appears to be half-baked and prepared in a hurry,” board member Sayuri Shirai said of Kuroda’s proposal, adding the economy was not worsening enough to justify such a radical step.
Board member Takahide Kiuchi said he was “extremely doubtful” of the feasibility of deploying the measure without deliberating thoroughly on the impact on the economy.
The decision to adopt negative rates stunned markets as it came days after Kuroda ruled it out as an option in parliament.
“Markets would be very surprised and could move quite a bit temporarily. But that’s not the purpose of what we do,” Kiuchi was quoted as saying. “The purpose of our policy is to improve medium- and long-term economic and price conditions.”
The BOJ ended negative rates, as well as other components of Kuroda’s radical stimulus programme, in 2024 and raised interest rates several times under current chief Kazuo Ueda.
Ueda, too, has recently struggled to garner board consensus, as the energy shock caused by the Middle East conflict muddles the economic outlook and the BOJ’s rate-hike path.
The BOJ’s decision in April to keep rates steady faced two hawkish dissenters calling for a hike. Its rate hike to 1 per cent in June then drew dissent from one dovish board member.
The BOJ releases summarised minutes several weeks after each policy meeting, and a full account of the deliberations about 10 years later.
Source: Reuters
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