The Bank of Japan's low interest rates may have contributed to the global financial market turmoil, Hirohide Yamaguchi, the government's nominee for BOJ deputy governor, said Tuesday.
"We can't rule out the possibility that our accommodative policy has had some influence on overseas financial markets," Yamaguchi, who is currently an executive director at the BOJ, said at a Diet hearing. "Some people say one side effect of our policy is the yen carry trade," in which investors borrow cheaply in Japan and put money into higher-yielding securities abroad.
The BOJ kept interest rates near zero percent for five years through July 2006 to spur economic growth and counter deflation. The central bank has since raised the benchmark overnight lending rate to 0.5 percent, still the lowest among the industrialized world.