BoJ’s Wakatabe: raising rates prematurely would push Japan back to recession

The Bank of Japan (BoJ) Deputy Governor Wakatabe was on the wires last hour, via Reuters, making a scheduled speech in Parliament.

Key Headlines:

Japanese banks have ample capital buffers.

Negative rates do depress profits from interest for banks.

The macro side effect of negative rates has yet to emerge.

Benefits of BoJ's easing policy is outweighing costs.

No major disruption to Japan's financial intermediation.

There are merits and demerits of monetary policy change over time.

Must be mindful that damage to bank profits from prolonged low rates could accumulate.

BoJ is continuing current policy so that price expectations will rise.

Yield curve will steepen if BoJ patiently maintains the current easing policy.

BoJ is doing what it needs to do in order to reach 2% inflation target.

Highly unlikely Japan will experience hyperinflation if BoJ sticks to the inflation target.

Raising rates prematurely would push Japan back to recession.

BoJ has tools to both ease and tighten policy.

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