"He probably wanted to say that negative rates entail costs but they will give you greater benefits".
- Takeshi Minami, Norinchukin Research Institute
According to the Haruhiko Kuroda, the BoJ governor, the negative rates particularly hurt the profit of financial institutions, while low long-term yields hit some other businesses by forcing them to inject more money for long-term pension obligations. Mr. Kuroda added "such developments can affect people's confidence by causing concerns over the sustainability of the financial function in a broad sense, thereby negatively affecting economic activity". It is worth to point out that in February, the BOJ began applying a rate of minus 0.1% on certain deposits held by commercial banks after the BOJ's purchases of Japanese government bonds. The following proved to be the main tool in order to fight deflation which began exceeding the limits. Moreover, yields on government bonds of up to 40 years dropped sharply during the following months.
In the meantime, the yen accelerated after the speech as investors started to wait further monetary easing. The yen was trading at 103.38 mark late on Monday in Tokyo, compared with 103.96 yen before the speech. The Nikkei 225, in turn, lost earlier gains, rising only 0.7%.
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