Kuroda says BOJ won't deepen negative rates at pre-set timing

By Leika Kihara

TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Friday he had no plan to push interest rates deeper into negative territory at a pre-set timing, dispelling market speculation that the central bank may expand stimulus as early as next month.

Persistent market turbulence has boosted the yen and weakened Japanese equities despite the BOJ's decision last month to adopt negative interest rates, keeping alive speculation that the bank will ease policy again in coming months.

But some analysts doubt whether Kuroda can push through more stimulus steps any time soon, with lawmakers, banks and even some BOJ policymakers criticizing the January move as bringing more risks than rewards.

Kuroda told parliament that it was technically possible to deepen minus rates, citing the example of European central banks already imposing negative rates of around 1 percent.

But he said it was hard to say by how much the BOJ could reduce them further, which would depend on how such a move affects banks' revenues and the cost of holding cash.

"For now, we would like to scrutinize how the policy effect of our 0.1 percent negative rate policy filters through the economy," Kuroda said.

"We have absolutely no plans to push rates further into negative territory at a pre-scheduled timing," he said.

Kuroda also dismissed criticism that the BOJ's decision to adopt negative rates was aimed at weakening the yen to give exports a competitive advantage.

"Like the European Central Bank, the BOJ's policy is aimed at achieving price stability," he said, adding that it was desirable for currencies to move stably, reflecting fundamentals.

The BOJ board was deeply divided on adopting negative rates. The January decision was made by a 5-4 vote and dissenters have publicly questioned the effectiveness of the policy this week.

Board member Takahide Kiuchi has blamed negative rates for heightening market volatility. Koji Ishida, a former commercial banker, also warned the move could destabilize Japan's banking system and won't boost capital expenditure much.

(Reporting by Leika Kihara; Editing by Chang-Ran Kim and Kim Coghill)

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