Interest rate cuts may do more harm than good to Japan's economy hit by fallout from the coronavirus pandemic, a senior International Monetary Fund official said, warning the central bank against pushing rates deeper into negative territory.
TOKYO - Interest rate cuts may do more harm than good to Japan’s economy hit by fallout from the coronavirus pandemic, a senior International Monetary Fund official said, warning the central bank against pushing rates deeper into negative territory.
“In the near term, expansionary fiscal policy is warranted to mitigate the impact of the COVID-19 in the short term and support the recovery afterwards,” he said in a written interview with Reuters. Sources have told Reuters the BOJ will discuss further steps to ease corporate funding strains at this month’s rate review as the fallout from the outbreak deepens.
Brekk said the BOJ should be cautious about deepening negative rates, a move considered as among key options if the central bank were to loosen policy. Critics of negative rates argue that the policy discourages financial institutions from boosting lending as it hurts their margins, running counter to government efforts to provide funds to cash-strapped firms.
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