ID :
73305
Sat, 08/01/2009 - 18:32
Auther :
Shortlink :
http://m.oananews.org//node/73305
The shortlink copeid
BOJ chief Hayami was `uneasy` about zero interest policy in 1999
TOKYO, July 31 Kyodo -
Late former Bank of Japan Governor Masaru Hayami was ''uneasy'' when the
central bank decided to adopt an unprecedented ''zero-interest-rate'' policy in
February 1999 in the wake of the banking crisis, according to minutes of its
policy meeting back then that became available Friday.
''As (the BOJ) has no experience (of implementing the policy), I feel uneasy a
little about what will happen,'' Hayami said at the bank's policy meeting on
Feb. 12, 1999.
During the meeting, the BOJ's Policy Board members decided by a majority vote
to push down the target for the overnight unsecured call rate ''as low as
possible,'' effectively deciding to introduce the zero-interest-rate policy.
The minutes also showed that other Policy Board members did not have any clear
picture of the policy's effects on financial markets, and some members
expressed concerns over its side effects. ''Whether we should try it or pass,
it is a difficult (decision,)'' said then policy board member Susumu Taketomi.
The Japanese economy back then was riddled with banks' mounting bad loan
problems, which led to a hefty injection of tax payers' money into major banks
in the following month. Japanese long-term interest rates were rising sharply.
The BOJ's policymakers' aggressive discussion on what to do with the surging
interest rates suggest the launch of the zero-interest-rate policy was a tough
decision and they may have opted to do so to ease the government's pressure on
the BOJ to increase its purchase of government bonds.
''If we provide ample funds to markets, I expect there would be positive
effects on long-term interest rates,'' then-governor Hayami said, according to
the minutes. But he also noted, ''Frankly, I am not confident whether the cut
in the short-term interest would generate sufficient effects.''
Meanwhile, minutes of the BOJ's policy meeting in March 1999, which also became
available Friday, showed that Hayami sharply criticized a delay in the
injection of public funds into the nation's major banks.
Referring to the government's slow decision to resort to the public funds to
rescue troubled banks, Hayami said during the March 25 policy meeting, ''I
think it was very wrong.''
''(Banks with) thin capital bases would go nowhere,'' he said, adding that
since the financial administration failed to take into account such a
situation, the timing of the infusion of public funds was delayed to March
1999.
The BOJ governor advocated the use of public funds to help out troubled banks.
At a press conference in October 1998, Hayami urged major banks to seek fund
injections from the government in unison to address bad loans.
During the March 25 policy gathering, the governor also noted that the
injection of public funds into major banks is an effort toward eliminating
excessively thin capital at banks and their excessively huge bad loans.
The U.S. government quickly moved to decide to inject public funds into
cash-strapped banks to cope with the global financial crisis exacerbated by the
collapse of U.S. investment bank Lehman Brothers Holdings Inc. last September.
Some critics say the U.S. government learned a lesson from Japan's mishandling
of a financial crisis a decade ago and made a swift decision to put public
funds into U.S. lenders.
The Japanese central bank scrapped the zero-interest-rate policy in August
2000. But within less than a half year, the bank introduced ''quantitative
easing'' to cope with the economic deterioration.
Under the quantitative easing policy, the BOJ flooded the financial system with
ample liquidity using the outstanding balance of the current account deposits
held by private financial institutions at the central bank to anchor the
short-term interest rates at near zero.
The minutes from February and March 1999 were part of the BOJ's Policy Board
meetings from January to June 1999 unveiled Friday. The bank releases basically
all the minutes of its policy board meetings 10 years later, and they contain
more information than a minutes summary it issues a month after every policy
meeting.
==Kyodo
Late former Bank of Japan Governor Masaru Hayami was ''uneasy'' when the
central bank decided to adopt an unprecedented ''zero-interest-rate'' policy in
February 1999 in the wake of the banking crisis, according to minutes of its
policy meeting back then that became available Friday.
''As (the BOJ) has no experience (of implementing the policy), I feel uneasy a
little about what will happen,'' Hayami said at the bank's policy meeting on
Feb. 12, 1999.
During the meeting, the BOJ's Policy Board members decided by a majority vote
to push down the target for the overnight unsecured call rate ''as low as
possible,'' effectively deciding to introduce the zero-interest-rate policy.
The minutes also showed that other Policy Board members did not have any clear
picture of the policy's effects on financial markets, and some members
expressed concerns over its side effects. ''Whether we should try it or pass,
it is a difficult (decision,)'' said then policy board member Susumu Taketomi.
The Japanese economy back then was riddled with banks' mounting bad loan
problems, which led to a hefty injection of tax payers' money into major banks
in the following month. Japanese long-term interest rates were rising sharply.
The BOJ's policymakers' aggressive discussion on what to do with the surging
interest rates suggest the launch of the zero-interest-rate policy was a tough
decision and they may have opted to do so to ease the government's pressure on
the BOJ to increase its purchase of government bonds.
''If we provide ample funds to markets, I expect there would be positive
effects on long-term interest rates,'' then-governor Hayami said, according to
the minutes. But he also noted, ''Frankly, I am not confident whether the cut
in the short-term interest would generate sufficient effects.''
Meanwhile, minutes of the BOJ's policy meeting in March 1999, which also became
available Friday, showed that Hayami sharply criticized a delay in the
injection of public funds into the nation's major banks.
Referring to the government's slow decision to resort to the public funds to
rescue troubled banks, Hayami said during the March 25 policy meeting, ''I
think it was very wrong.''
''(Banks with) thin capital bases would go nowhere,'' he said, adding that
since the financial administration failed to take into account such a
situation, the timing of the infusion of public funds was delayed to March
1999.
The BOJ governor advocated the use of public funds to help out troubled banks.
At a press conference in October 1998, Hayami urged major banks to seek fund
injections from the government in unison to address bad loans.
During the March 25 policy gathering, the governor also noted that the
injection of public funds into major banks is an effort toward eliminating
excessively thin capital at banks and their excessively huge bad loans.
The U.S. government quickly moved to decide to inject public funds into
cash-strapped banks to cope with the global financial crisis exacerbated by the
collapse of U.S. investment bank Lehman Brothers Holdings Inc. last September.
Some critics say the U.S. government learned a lesson from Japan's mishandling
of a financial crisis a decade ago and made a swift decision to put public
funds into U.S. lenders.
The Japanese central bank scrapped the zero-interest-rate policy in August
2000. But within less than a half year, the bank introduced ''quantitative
easing'' to cope with the economic deterioration.
Under the quantitative easing policy, the BOJ flooded the financial system with
ample liquidity using the outstanding balance of the current account deposits
held by private financial institutions at the central bank to anchor the
short-term interest rates at near zero.
The minutes from February and March 1999 were part of the BOJ's Policy Board
meetings from January to June 1999 unveiled Friday. The bank releases basically
all the minutes of its policy board meetings 10 years later, and they contain
more information than a minutes summary it issues a month after every policy
meeting.
==Kyodo
