TOKYO, Jan 17 (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Thursday central banks must carefully evaluate the effects of unconventional monetary policy steps, as their benefits and side-effects could differ from those brought about by conventional policy.
Kuroda also said demographic changes in major economies could affect how financial institutions behave, thereby affecting central banks’ policy decisions.
“As a low interest rate environment persists and credit demands become stagnant amid a declining population, banks might accelerate their search-for-yield activities such as expanding their exposure to overseas assets and increasing loans and investments to firms with higher credit risks,” he said.
“If that were the case, the entire financial system could become less stable,” Kuroda said in a seminar that Japan hosted as chair of this year’s G20 meetings. (Reporting by Leika Kihara; Editing by Chris Gallagher)