Japan decides to end negative interest rate policy after 17 years!

The Bank of Japan (BoJ) has decided to end the negative interest rate policy it began in 2016 following significant wage increases at major companies.

In a statement released by the BoJ after its two-day monetary policy meeting, it was announced that a decision was made to raise short-term interest rates from minus 0.1 percent to a range of 0 to 0.1 percent.

Thus, with its first interest rate hike in 17 years, the BoJ became the last among the world's leading central banks to abandon the negative interest rate policy.

The BoJ had first initiated the negative interest rate policy (where financial institutions were charged minus 0.1 percent interest on certain excess reserves deposited with the central bank) in 2016 as part of its fight against deflation.

In addition to ending the negative interest rate policy, the Bank also terminated its yield curve control on 10-year Japanese government bonds. The BoJ will continue its bond purchases, while purchases of corporate bonds and similar assets will be phased out within 1 year.

While leading global central banks such as the US Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE) raised interest rates to curb inflation that reached record levels following the pandemic, the BoJ maintained its ultra-loose monetary policy to stimulate economic growth.

News Source: AA