Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Friday there was room to cut interest rates further into negative territory, but could not comment on by how much.
Under yield curve control, the BOJ applies a -0.1% interest rate on a small pool of reserves parked by financial institutions. It also guides the 10-year bond yield around 0% as part of efforts to sustainably meet its 2% inflation target.
While it was possible to push short-term rates deeper into negative territory, cutting it to -2% or -3% would cause "huge disruption" to the banking system and was therefore difficult, Kuroda told parliament.
"It'd be hard to push short- and long-term interest rates down just by deepening (short-term) negative rates," Kuroda said, stressing the importance to keep buying government bonds.
Kuroda will retire when his second, five-year term ends in April. (Reporting by Leika Kihara; Editing by Muralikumar Anantharaman)