Japan's regional lenders outline dangers of ultra-low rates

They are also calling for commercial banks to expand beyond traditional banking.

Reuters reported that Japan’s regional banks are calling on the central bank to set its eyes on the rising costs of prolonged monetary easing as it could hit bank profits and dwindling liquidity in the bond market.

Takeshige Shibato, head of the Regional Banks Association of Japan, noted that the BOJ said that it aims to achieve 2% inflation in two years but that six years have already passed.

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“The policy has provided sufficient benefits to the economy. On the other hand, various side-effects are emerging in areas like financial intermediation and bond market functions. We hope the BOJ takes these into account,” Shibado explained, adding that he is also calling for regulators to loosen up rules for commercial banks to expand operations beyond traditional banking.

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The escalating US-China trade wars coupled with slowing global demand have increased expectations that BoJ will maintain its massive stimulus programme, with some investors betting its next move could be to ramp up monetary support.

Here’s more from Reuters.