Bank of Japan ends era of negative rates with few clues on further hikes
The Bank of Japan scrapped the world’s last negative interest rate, ending the most aggressive monetary stimulus programme in modern history, while also indicating that financial conditions will stay accommodative for now.
The bank’s board voted 72 to set a new policy rate range of between 0 per cent and 0.1 per cent, shifting from a 0.1 per cent shortterm interest rate, according to a statement at the conclusion of its twoday meeting on Tuesday. The BOJ also scrapped its complex yield curve control programme while pledging to continue buying longterm government bonds as needed, and ended purchases of exchangetraded funds.
The lack of signalling on any future rate hikes weighed on the yen — which slid past the closely watched 150 mark versus the dollar — while benchmark government bond yields edged lower. The weaker currency supported Japanese equities, helping the Nikkei 225 Stock Average reclaim the key 40,000 level. “We judged that achieving
Kazuo Ueda, Governor, Bank of Japan
the goal of sustainable 2 per cent inflation has come within view,” Governor Kazuo Ueda said at a postdecision press conference. “The largescale monetary easing policy served its purpose.”
Ueda emphasised that even with the end of the negative rate, it’s important that financial conditions remain accommodative. “There is still some distance to 2 per cent, if we look at it from the perspective of the expected inflation rate,” he said. “Considering the gap, I think we will conduct normal policy as I mentioned earlier, keeping the importance of maintaining an accommodative environment in mind.”