BOJ Fiercely Divided over Rate Cuts amid 2008 Financial Crisis: Minutes

Politics

Tokyo, Jan. 29 (Jiji Press)--The Bank of Japan was fiercely divided over interest rate cuts at policy meetings amid the 2008 financial crisis, according to detailed minutes of the meetings, released on Tuesday.

The minutes show that then BOJ Governor Masaaki Shirakawa was keen to keep the central bank's policy interest rate above zero, even if close to the threshold, as the BOJ lowered the rate by 0.2 percentage point twice in October-December 2008, sending it to 0.1 pct from 0.5 pct.

The first of the two 0.2-point decreases came when the BOJ Policy Board met on Oct. 31, following the yen's sharp rise and a plunge in Japanese shares after the BOJ skipped joining a concerted move by six U.S., Canadian and European central banks to reduce interest rates on Oct. 8.

At the Oct. 31 meeting, three board members pushed for a 0.25-point cut, as expected by market participants, and a different member opposed any rate cut, while the BOJ leadership aimed for a 0.2-point reduction to reserve room for a further cut.

Then Deputy Governor Hirohide Yamaguchi said that there was no single correct answer to the question whether to lower the policy rate by 0.2 point or 0.25 point, but that a 0.2-point reduction seemed preferable, according to the minutes.

[Copyright The Jiji Press, Ltd.]

Jiji Press