The fall in long-term bank lending rates in November will reinforce the concerns of some BoJ Board members that ultra-loose monetary policy is harming the profitability of private banks. November’s drop in long-term lending rates was the sharpest since the BoJ last cut its policy rate in 2016 and is evidence that the squeeze on bank lending margins has not come to an end yet. It came in spite of 10-year JGB yields rising rapidly towards the end of last year. In all, the fall in long-term interest rates supports our view that concerns over financial stability will prevent the Bank of Japan from introducing any fresh easing measures for the foreseeable future.
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