The era of negative interest rates comes to an end. The Bank of Japan – the only central bank that still maintained this principle – decided this Tuesday to make changes to its aggressive monetary stimulus policy and proposed a rate hike, the first in the country since 2007. The decision had been awaited for some time. time.
At the end of a two-day meeting, governor Kazuo Ueda’s team decided to raise interest rates from -0.1% to a range between 0% and 0.1%, in an attempt to bring inflation in the country to 2%. Furthermore, the institution dropped its ETF purchase program as well as its rate curve control program. However, it will continue to purchase long-term debt when necessary.
“There is still some distance to 2%, if we look at the perspective of the expected inflation rate”, said Kazuo Ueda at a press conference, after the decision. “Considering the gap, we will conduct a normal policy as mentioned earlier, keeping the importance of having an accommodative environment in mind.” Even so, interest rates will still remain at very low levels, at a time when the Japanese economy is showing some fragility. Analysts therefore expect the Bank of Japan to carry out increases smoothly, if the institution’s intention is now to continue on this path.
In a first reaction, the yen fell to its lowest level in two weeks.
