SHIZUOKA, Japan, Oct. 4 (Kyodo) - Bank of Japan (BOJ) Policy Board member Teizo Taya on Thursday voiced reluctance to ease credit further, saying interest rates are already near rock bottom. "Monetary relaxation based on interest rate adjustments has almost approached its limits," Taya told a lecture meeting attended by leaders of the business community in Shizuoka, central Japan.
"Although the current accounts (at the BOJ) of financial institutions are awash with funds, the lenders have begun to leave them as they are" without investing them in the form of loans or securities investments, Taya said.
With the remark, Taya appeared to be questioning the effectiveness of the central bank's strategy of pouring funds into the commercial banks' current accounts through purchases of securities held by the banks.
Following the Sept. 11 attack on the United States, the BOJ temporarily bolstered the balance of current-account deposits of financial institutions to more than 12 trillion yen, money brokers said. That is more than double the 6 trillion yen the Policy Board adopted Aug. 14 as a policy goal.
Taya said a further increase in the monthly amount of outright BOJ purchases of long-term government bonds might have the adverse impact of putting upward pressure on interest rates. Such an increase "might make the possibility of a rise in interest rates become a reality by fueling suspicions about fiscal policy discipline," he said.
He rejected as unrealistic a proposal to have the central bank purchase stocks, corporate bonds and real estate from the market to stimulate demand for these assets.
Taya also brushed aside suggestions that the central bank should purchase dollar-denominated securities.
"It is hard to distinguish such a proposed purchase from central bank interventions to stabilize currency rates," he said.