2024-03-19 04:41:15
Bank of Japan building
The Bank of Japan decided on Tuesday to end eight years of negative interest rates and other unconventional policy measures, announcing a historic shift away from focusing on reviving growth through ultra-lenient monetary stimulus.
Although the move would mark Japan’s first interest rate hike in 17 years, it would still keep rates near zero, as the fragile economic recovery forces the central bank to be patient with any further hike in borrowing costs, according to analysts.
The shift makes the Bank of Japan the latest central bank to exit negative interest rates and ends an era in which policymakers around the world sought to support growth with cheap money and unconventional monetary instruments.
In a widely expected decision, the Bank of Japan abandoned a policy in place since 2016 that imposed a 0.1 percent fee on a small pool of financial institutions’ excess reserves deposited with the central bank.
The Bank of Japan set the overnight interest rate as the new interest rate, and decided to guide it in a range between 0 and 0.1 percent by paying 0.1 percent interest on deposits at the central bank.
The central bank also abandoned yield curve control (YCC), a policy in place since 2016 that set long-term interest rates around zero.
But according to the Bank of Japan’s statement issued today, it confirmed that it will continue to buy “the same amount” of government bonds as before and will intensify purchases in the event that yields rise quickly.
In addition, the Bank of Japan decided to stop purchasing risky assets such as exchange-traded funds (ETFs) and Japanese real estate investment trusts.
Bank of Japan Governor Kazuo Ueda is expected to hold a press conference at 0630 GMT, to comment on the decision.
Many market economists expected the central bank to exit its ultra-loose monetary policy in March or April, especially with inflation exceeding the Bank of Japan’s 2 percent target for more than a year.
A larger-than-expected increase in wages by major Japanese companies also fueled speculation that the Japanese central bank will abandon its eight-year negative interest rate policy.
A week full of central bank decisions
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