Japan\u2019s central bank has ended eight years of negative interest rates, in an overhaul of one of the world\u2019s most aggressive monetary easing programmes that sought to encourage bank lending and spur demand.<\/p>\n\n\n\n
In its first interest rate hike in 17 years, the Bank of\u00a0Japan\u00a0[BOJ] said it was lifting its short-term policy rate from -0.1% to between zero and 0.1%, although analysts said a fragile economic recovery meant it would continue go slow with any further rise in borrowing costs.<\/p>\n\n\n\n
The shift makes the BOJ the last central bank to exit negative rates, bringing to an end an era in which policymakers sought to prop up growth by pushing banks to lend more by charging interest on money banks deposited at Japan\u2019s central bank.<\/p>\n\n\n\n
In a widely expected decision, the BOJ on Tuesday ditched a policy put in place in 2016, judging that its long-held goal of stable 2% inflation was \u201cwithin sight\u201d.<\/p>\n\n\n\n
Seven of the bank\u2019s nine policy board members supported the move while two opposed it, according to the Kyodo news agency.<\/p>\n\n\n\n
Wage growth has added to confidence among BOJ board members about the probability of achieving 2% inflation after decades of deflation and stagnation.<\/p>\n\n\n\n
Japan\u2019s biggest employers agreed to a 5.28% wage increase in negotiations with unions this month \u2013 the biggest rise since 1991 \u2013 lifting hopes for a \u201cvirtuous cycle\u201d of pay and price increases. The pace is the fastest in over three decades.<\/p>\n\n\n\n
\u201cThis would be the first rate hike in 17 years, so it has a lot of symbolic significance,\u201d Izumi Devalier, head of Japan economics at BofA Securities, said prior to the BOJ\u2019s policy decision.<\/p>\n\n\n\n
\u201cBut the actual impact on the economy is very small,\u201d she said, noting the BOJ will probably maintain its resolve to keep monetary conditions loose. \u201cWe would not expect a substantial rise in funding costs or households mortgage rates.\u201d<\/p>\n\n\n\n
The BOJ is hoping that Asia\u2019s second-biggest economy is emerging from a long period of\u00a0deflationary pressure\u00a0\u2013 a trend that had put it at odds with other central banks, which have raised rates in recent years to tackle inflation triggered by the Covid-19 pandemic, Russia\u2019s invasion of Ukraine and supply chain problems.<\/p>\n\n\n\n
The BOJ had come under pressure to end its ultra-easy monetary policy, seen as a key factor in the rapid decline of the yen against the dollar. The weak yen has helped exporters but placed greater financial pressure on households.<\/p>\n\n\n\n
Inflation in Japan momentarily reached its highest level in more than 40 years in 2023, forcing households to tighten their belts and creating more headaches for the country\u2019s embattled prime minister,\u00a0Fumio Kishida. However, that rate was still well below the levels of inflation that caused the cost of living to spike in many countries around the world in recent years.<\/p>\n\n\n\n
The US Federal Reserve and other central banks yanked up rates to rein in galloping inflation after Russia\u2019s 2022 invasion of Ukraine.<\/p>\n\n\n\n
But haunted by the country\u2019s \u201clost decades\u201d of stagnation and deflation, the BoJ kept its main rate negative.<\/p>\n\n\n\n
Raising the rate will make loans more expensive for consumers and businesses and increase Japan\u2019s bill for servicing its national debt, which at about 260% of gross domestic product is among the world\u2019s highest.<\/p>\n\n\n\n
Markets are now focusing on governor Kazuo Ueda\u2019s post-meeting news conference for clues on the pace of further rate hikes.<\/p>\n\n\n\n
An end to the world\u2019s last remaining provider of cheap funds could also jolt global financial markets as Japanese investors, who amassed overseas investments in search of yields, shift money back to their home country.<\/p>\n\n\n\n
\u201cWe trust the BOJ,\u201d the paper quoted a source close to Kishida as saying. The decision \u201cis in their hands\u201d.<\/p>\n\n\n\n
With Reuters and Agence France-Presse<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Japan\u2019s central bank has ended eight years of negative interest rates, in an overhaul of one of the world\u2019s most aggressive monetary easing programmes that sought to encourage bank lending and spur demand. In its first interest rate hike in 17 years, the Bank of\u00a0Japan\u00a0[BOJ] said it was lifting its short-term policy rate from -0.1% […]<\/p>\n","protected":false},"author":8,"featured_media":41891,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_post_source_name":"","_post_source_url":"","footnotes":""},"categories":[61],"tags":[5274,7358,9330,11941,9042,3977,7893,8051,6672,5222,5200,6725,9375,11337,5195,5196,12384,7200,5575,7058,6543,6663,12773,6546,7201,5252,2959,9326,6565,10634,9833,5612,4771,8000,7968,11973,5485,12103,3174,10214,3457,5261,5180,6348,36,594,9215],"class_list":["post-41890","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-asia","tag-bank","tag-banks","tag-bill","tag-borrowing","tag-central-bank","tag-chain","tag-consumers","tag-cost-of-living","tag-covid","tag-covid-19","tag-debt","tag-decline","tag-demand","tag-dollar","tag-economy","tag-exporters","tag-federal-reserve","tag-france","tag-fumio-kishida","tag-growth","tag-households","tag-increase","tag-inflation","tag-interest-rate","tag-invasion","tag-japan","tag-japanese","tag-loans","tag-lost","tag-meeting","tag-money","tag-mortgage","tag-negotiations","tag-nine","tag-one","tag-pandemic","tag-price","tag-prime-minister","tag-rates","tag-russia","tag-salary","tag-ukraine","tag-us","tag-world","tag-who","tag-yen"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts\/41890","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/comments?post=41890"}],"version-history":[{"count":1,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts\/41890\/revisions"}],"predecessor-version":[{"id":41892,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts\/41890\/revisions\/41892"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/media\/41891"}],"wp:attachment":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/media?parent=41890"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/categories?post=41890"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/tags?post=41890"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}