Bank of Japan Governor Haruhiko Kuroda met with Prime Minister Shinzo Abe Friday and discussed global economic and market developments. Kuroda told reporters that “There was no particular comment from the prime minister. “

According to the BOJ governor, Japan's economy was moving in line with the BOJ's scenario and that now is the time to monitor the economic effects of last month's decision to adopt a negative interest rate policy.

The meeting took place against a background of violent moves that took place this week that threaten to plunge Japan back into deep deflation and collapse the current ‘Abenomics' experiment.

Negative Rates Not Working

The drastic developments have been disastrous for Governor Haruhiko Kuroda who pushed through negative rates against strong protests by half the bank's voting members. The chief motive for the move was counter deflation by weakening the currency. Instead, the yen appreciated 9 percent against the US dollar since the interest rate cut entirely defeating the purpose of the move.

Japan is already in the grip of deflation. Producer prices fell 3.1 percent in January and the economy contracted in the fourth quarter. The surging yen is making things even worse, calling into question the strategy put into place three years ago by premier Shinzo Abe who promised to break the country's deflationary psychology once and for all.

David Bloom, currency chief at HSBC said that “This is a reverse policy shock. We are reaching the limits of quantitative easing as we know it. Countries are losing their ability to drive down their currencies.”

Bloom believes that there is almost nothing the Bank of Japan can do to stop inflows of money in any case.