Hayami slammed zero interest
Friday, July 30, 2021 1:44 PM

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Jul. 30, 2010 (The Yomiuri Shimbun) -- Then Bank of Japan Gov. Masaru Hayami described the central bank's zero-interest rate policy as "half-dead," and called for an end to the unprecedented measure during a bank policy meeting in June 2000, according to minutes of the meeting that were released Friday.

Concerned about the side effects of the zero-interest rate policy, Hayami said during the June 28, 2000, meeting that "If the central bank just provides money free of charge, the market will collapse."

Looking at past monetary policies implemented around the world, Hayami called the adoption of the zero-interest rate policy "unusual" and described it as "a half-dead monetary policy," indicating his desire to terminate the measure, which was designed to guide the overnight unsecured call rate as low as possible.

During a policy meeting on June 12, 2000, two months before the bank ended the zero-interest rate policy, meeting chairman Hayami and other members confirmed the trend toward an economic recovery. Most of the meeting attendees agreed the conditions for lifting the policy were about to be met.

The central bank released on Friday minutes from its policy board meetings held between January and June 2000.

There were heated exchanges during the meetings over the side effects of the ultra-easy monetary policy, revealing the discussions leading up to the lifting of the policy.

The zero-interest rate policy was adopted in February 1999 to buoy the flagging economy.

Deeming that business performance had improved and uneasiness regarding the financial system had eased, the central bank decided to raise the interest rate to around 0.25 percent on Aug. 11, 2000.

Yet, following the collapse of the information technology-led bubble economy around the world, the central bank introduced a quantitative monetary easing policy in March 2001, thus effectively bringing back the zero-interest rate policy.

 

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