Bank of Japan Governor Haruhiko Kuroda said deepening negative interest rates remains on the table since a slowdown in global economic growth could worsen due to trade tensions, the Nikkei Asian Review reported.
The Bank of Japan kept its short-term interest rate unchanged at negative 0.1% in July and pledged to maintain that level "at least through around spring 2020." But the central bank also said it "will not hesitate to take additional easing measures" if necessary as it lowered its GDP growth and inflation forecasts for fiscal 2019.
Kuroda told the Nikkei in an interview that the Bank of Japan is "considering a variety of possibilities" including a combination of easing measures, and that cutting rates "further into the negative zone is always an option."
While additional easing measures are still not warranted at the moment, Kuroda said "caution is needed" amid the U.S.-China trade dispute and other global uncertainties.
Kuroda said the central bank will adopt the "most appropriate" easing measures while taking into account their impact on financial intermediation or market functioning.
Bank of Japan policymaker Hitoshi Suzuki warned last week against excessive monetary policy easing. According to research from the University of Bath, negative-interest-rate policies are proving counter-effective, resulting in deteriorating banking profits, stifled loan growth and tightened bank margins.
