BOJ Negative Rates Risk Destroying Loan Market as Freeze Deepens

Two months after the BOJ said it would start charging interest on some lenders' reserves, the outstanding balance in the interbank call market tumbled to a record low 2.97 trillion yen ($27 billion) on March 31, according to Tanshi Kyokai data going back to 1988.

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The disruption to Japan's ground zero for bank funding coincides with a collapse in bond-market trading over the past year, even as the BOJ's hoarding of notes has left it nowhere near achieving its 2 percent inflation target three years after Haruhiko Kuroda became governor. When questioned by a lawmaker in parliament last month, Kuroda agreed that it would be theoretically possible to lower rates to minus 0.5 percent, from the current minus 0.1 percent.