It appears the Bank of Japan’s decision to adopt a negative interest rate was far from a unanimous decision, as four of the board’s nine members opposed the step, according to a statement released by the BOJ.
During its meeting from Jan. 28 to 29, the BOJ stunned the world’s markets by announcing that it would charge a negative interest rate of 0.1% on the money financial institutions keep at the bank. The news sent the Nikkei stock index up 3% briefly.
Board members Sayuri Shirai, Koji Ishida, Takehiro Sato and Takahide Kiuchi opposed the move, according to minutes of the central bank’s January meeting released on Monday.
After the announcement, BOJ Gov. Haruhiko Kuroda, said the negative interest rate, which goes into effect Feb. 16, would stir personal consumption and boost investment.
According to the minutes, there was a lot of dissent in the meeting. One policymaker said that there is limited room for private-sector borrowing rates to fall further, despite an additional drop in government bond yields, and that business fixed investment is unlikely to improve.
However, another board member said: “The introduction of a negative interest rate will have larger side effects on the functioning of financial markets and the financial system than positive effects on the real economy … Thus, in this policy measure, the side effects outweigh the positive effects.”
“I am concerned that financial markets will expect further cuts in the interest rate into negative territory,” another policymaker said.
Many of the members feared potential “confusion” from the move, with one saying the measure “could reduce the monetary easing effect.”
Another said the introduction of a negative interest rate could lead to a “competition” with other central banks that have adopted similar measures.