* BOJ's policy supported growth, but side-effects
* Warns BOJ against rate cuts despite steps to mitigate pain
* Side-effects of BOJ policy materializing - bank lobby head
TOKYO, June 16 (Reuters) - Japan's central bank should be
cautious about deepening negative interest rates as such a move
could have a "very big" impact on lenders' earnings, the head of
a lobby of regional banks said.
Japanese commercial banks have been vocal opponents of the
Bank of Japan's negative rate policy, as years of ultra-low
rates erode their profits and add to woes such as a dwindling
population and intensifying competition.
Regional lobby chief Hisashi Shibata said the BOJ's massive
stimulus program had supported the economy by keeping
borrowing costs low for companies hit by the coronavirus
"On the other hand, the BOJ's policies have narrowed bank
margins and their side-effects are materializing," Shibata, who
took over the rotating role of the bank lobby's chief on
Wednesday, told a news conference.
The central bank has created several schemes since last year
to mitigate the pain inflicted on lenders by its negative rate
policy and spur regional lenders to further revitalize their
These include a scheme for the BOJ to pay interest to
lenders that tap it for funds to boost lending, a move the
central bank said was aimed at convincing markets it would cut
rates, if needed to support the economy.
"Even after the creation of this new scheme, I hope the BOJ
takes a cautious stance about deepening negative rates,"
Shibata, who is also president of regional lender Shizuoka Bank,
told the conference.
The BOJ in March moved to make its stimulus program
sustainable enough to weather a prolonged battle to fire up
inflation to a target of 2%.
(Reporting by Leika Kihara; Editing by Clarence Fernandez)