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Bullish Argument Down, But Not Out

MNI (London)
     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda said Thursday that the
central bank has tools to stimulate the economy, even when the bank faces the
zero lower bound, but needs to carefully watch both the favorable and
unfavorable effects.
     Kuroda said, "In a low interest rate environment, there is a greater risk
that central banks will face the zero lower bound problem, as the starting point
of monetary easing is to lower market interest rates below the neutral level of
interest rates." He was speaking at the G20 symposium cosponsored by the BOJ and
the Ministry of Finance.
     Other key points from Kuroda's speech:
     --"We have invented various unconventional monetary policy measures to
tackle (the zero lower bound), such as negative interest rate policies, lowering
of longer term interest rates and depressing risk premia by purchasing various
assets based on experiences of past financial crises."
     --"We now know we have the tools to stimulate the economy even when we face
the zero lower bound problem."
     --"However, we need to carefully monitor and evaluate the effects of these
unconventional measures on economic developments, prices and financial
conditions since the transmission mechanisms, benefits, and side-effects of
these measures could be different from those of conventional monetary policy
measures based on controlling short-term interest rates."
     --"The natural rate, which is consistent with potential growth rates, will
decline if long-term growth rates decline together with a declining and aging
population."
     --"There will be downward pressure on real interest rates as the natural
rate declines."
     --"As a result, nominal interest rates consistent with their economic
potential decrease, given that the inflation rates are constant."
     --"An aging and declining population doesn't necessarily push down
macroeconomic and per capital growth rates." "Even though demographic changes
have a negative impact on economic growth, economic growth could be stimulated
by promoting capital accumulation and innovation."
     --It is the most pressing agenda "how do we maintain a social security
system with an aging population and fewer children." "We continuously assess the
most appropriate public social security system, taking into account of
significant changes to demographic structures."
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MAJDS$,MMJBJ$,M$A$$$,M$J$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com