The Bank of Japan (BOJ) is not running out of policy options in its attempt to reinvigorate the economy, a senior Japanese government official said yesterday, days after the central bank surprised investors by adopting a negative interest-rate strategy to spur banks to lend more.
“I don’t think that’s the case,” Japanese Deputy Chief Cabinet Secretary Hiroshige Seko said when asked in an interview whether bank policymaking was nearing its limits.
“There are other central banks that have introduced lower negative interest rates,” he said. “This is not the last resort.”
Bank Governor Haruhiko Kuroda’s decision to penalize a portion of banks’ reserves held at the central bank is a strategy once shunned by central bankers, but which has recently been adopted by Sweden, Denmark, Switzerland and the European Central Bank.
The strategy is to complement the record asset-purchase program that has expanded the central bank’s balance sheet to about three-quarters the size of the economy.
The bank’s policies have also weakened the yen by more than 20 percent against the US dollar since Kuroda took the post in 2013, helping Japanese exporters and lifting stock prices.
The yen gained for a second day yesterday, climbing 0.4 percent.
Nonetheless, recent weakness in exports, household spending and production have prompted concern that a global economic slowdown is starting to weigh on Japan’s economy.
Economists, including David Carbon of DBS Bank Ltd in Singapore, have said the government needs to follow through on Japanese Prime Minister Shinzo Abe’s promised economic reforms to pull the nation out of stagnation, rather than leave the burden entirely to the central bank.
The negative interest-rate policy will not affect individual depositors if banks react by investing actively, Seko said at the prime minister’s residence in Tokyo.
“This doesn’t mean that financial institutions will be offering negative interest rates,” he said. “If the banks act appropriately, this is not something that will affect ordinary depositors.”
The appropriate response on the part of the banks would be to “actively lend money and make investments,” he said.
Seko said that the Bank of Japan has been communicating with financial institutions to make sure the effect of the new policies on their profits is not too harsh, adding that he wanted to monitor the situation.
The negative-interest rate plan, which was approved by the bank’s board in a 5-4 vote, is to take effect on Feb. 16.
On Friday last week, the bank announced it was delaying for the third time in a year the timing of reaching its 2 percent inflation target.
It is now aiming to reach that level by about the six months starting in April next year.
“It can’t be helped, because it was not foreseeable that oil prices would fall to this extent,” Seko said. “The target is being maintained and policies are being introduced to achieve it, so I’m not concerned.”
Debate is deepening over whether Japan’s economy can withstand the effects of a planned sales-tax increase in April next year, after rises in 2014 and 1997 both sparked economic contractions.
“The global economy may affect the Japanese economy somewhat, or it may be actually affecting it now,” Seko said.
Whether that leads to a delay in the introduction of the sales tax rise depends on economic conditions at that point, he said.
He declined to comment on when the final decision will be made.
Seko said Abe has committed to raising the tax as planned unless there is an event on the scale of the 2008 financial crisis, referred to in Japan as the “Lehman shock.”
“We will have to decide at that point whether it is on the scale of the Lehman shock,” he said. “It would be an unhappy situation for the Japanese economy if there were another event like the Lehman shock, so Japan will take necessary economic measures to stop that from happening.”
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to