UPDATE 1-BOJ Kuroda says no want to adopt adverse deposit rates in Japan

TOKYO Bank of Japan Governor Haruhiko Kuroda said on Monday he saw no need to have to implement adverse deposit rates in Japan as borrowing fees were already very low due to the central bank’s aggressive asset purchases.

The European Central Bank has adopted negative deposit prices to penalize monetary institutions for parking excess funds at the central bank and encourage them to boost lending as an alternative.

Such a step was unnecessary in Japan as the BOJ’s enormous asset-acquiring system, dubbed “quantitative and qualitative easing” (QQE), was pushing down bond yields across the curve, Kuroda said.

“Our QQE has had an intended impact on the economy and economic markets. Banks have been rising their loans to the real economy … Rebalancing has also been taking spot,” Kuroda told a seminar in Tokyo.

“So we don’t believe we must implement damaging deposit interest prices,” he mentioned.

Kuroda also warned of possible drawbacks from excessive financial regulation such as hampering banks’ profit-making activity, as international policymakers push by way of drastic regulatory reforms.

The extent of effects of big-scale regulatory reforms, such as the Volcker rule in the United States, on the flow of funds among economic institutions remains unknown, Kuroda stated.

“From a extended-term perspective, in order for the monetary system to guarantee stability and in turn contribute to sustainable economic growth, economic institutions need to have to be sufficiently profitable via active and innovative economic intermediation,” he mentioned.

“In this regard, it is critical to get rid of any regulatory excess, inconsistency among regulations, and uncertainty relating to the regulatory atmosphere.”

Most economists in a Reuters poll published on Monday expect the Bank of Japan will expand its stimulus plan in the 1st half of subsequent year, though a tiny minority of respondents forecast no further central bank easing in 2016.

(Reporting by Leika Kihara Editing by Chang-Ran Kim & Kim Coghill)