Japan's central bank governor on Thursday said the bank's adoption of negative interest rates was not directly aimed at weakening the yen, dismissing wider criticism that the policy was a failure amid a surge in the local currency.
The Bank of Japan stunned markets by deploying negative interest rates last month to prevent financial market volatility from hurting business confidence and delaying an exit from deflation.
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The move, however, has failed to override a wave of global risk-aversion that has sent global stock markets into a slump and bolstered appetite for the safe-haven yen.
BOJ Governor Haruhiko Kuroda said policy objectives around price and currency stability were not the same thing in large economies like Japan. He also blamed persistent market volatility on investors' concerns over China's slowdown, slumping oil prices and banking-sector woes in Europe.
"Global market jitters have not yet subsided," Kuroda told an upper house financial committee meeting on Thursday.
He said in smaller economies like Denmark and Switzerland - where the trade to GDP ratio is comparatively higher - negative rates work more directly in weakening their currencies. This means achieving price stability and currency stability is roughly the same thing, he said.
However, central banks in larger economies like Japan, the U.S. and the euro zone do not target exchange rates in guiding monetary policy because the direct impact of policy on currency moves is weaker, he added.
"Central banks of big economies don't target currency rates in guiding policy," Kuroda said.
He also said the BOJ's massive asset-buying program was not aimed at deliberately boosting stock prices.
A senior BOJ official, however, revealed at the same parliament session that the BOJ's exchange-traded fund (ETF) holding as of September last year stood at 7.8 trillion yen ($68.5 billion), roughly 54 percent of Japan's total ETF market.
Kuroda said he expects the positive effects of the BOJ's negative interest rate policy to gradually spread to the economy and prices.
"The policy effect (of negative interest rates) is appearing" in the form of declines in bond yields, he said.