The top executive of Japan’s biggest bank yesterday delivered a rare criticism of the Bank of Japan, saying its negative interest-rate policy has contributed to anxiety among households and companies, while prolonging it might weaken financial institutions.
“Both households and businesses have become skeptical about the effectiveness of policy measures to address the current economic problems,” Mitsubishi UFJ Financial Group Inc president Nobuyuki Hirano said in a speech in Tokyo.
Declines in banks’ net interest margins “will become even more severe and protracted by the implementation of the negative interest-rate policy,” Hirano said.
Hirano said there is “no guarantee” that negative rates will encourage companies to increase capital spending, because low borrowing costs and deflation have been “business as usual for over a decade.”
Lenders will not be able to pass on negative rates to individual and corporate depositors, he said in English at a conference of international bankers.
His remarks are among the strongest yet by a bank executive following the Bank of Japan’s decision in January to start charging lenders on some of their excess reserves to spur credit growth and investment.
Bank of Japan Governor Haruhiko Kuroda said in New York on Wednesday that Japan’s financial markets would have been in worse shape if the central bank had not introduced the policy and there is room for further rate cuts.
So far the policy has yet to spur bank lending, which rose the least in three years last month, Bank of Japan figures showed this week.
The average interest rate on new loans fell to a record-low 0.793 percent in February, and banks, including Mitsubishi UFJ, have cut deposit rates to as low as 0.001 percent.
Hirano also hit out at discussions among global regulators toward restricting the use of banks’ own methods for gauging operational risk, questioning the need for authorities to impose a standardized regime when they are already able to review internal models.
“A simple comparison of figures measured by a less accurate methodology can be misleading,” Hirano said.
“The solution is not to limit the use of internal models and allow only standardized methods,” he said, adding that investors need comprehensive information to analyze banks’ soundness.
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