The Lombard Review

Japan ends negative rates

First BoJ hike in 17 years

Okręt patrolowy Japońskiej Straży Przybrzeżnej „Akitsushima (PLH-32)” w porcie w Jokohamie
Okręt patrolowy Japońskiej Straży Przybrzeżnej „Akitsushima (PLH-32)” w porcie w Jokohamie Photo: Matthide127/Wikimedia Commons · CC0
By The Lombard Review
1 min read

Key dataBoJ 0–0.1%

In a historic policy shift on 19 March, the Bank of Japan officially terminated seventeen years of unconventional monetary experimentation. By lifting its benchmark overnight rate from minus 0.1 per cent into a range of zero to 0.1 per cent, abandoning Yield Curve Control, and halting ETF purchases, Governor Kazuo Ueda led the world's last negative-rate central bank back to orthodoxy.

The Rayburn House Office Building, completed in early 1965, is the third of three office buildings constructed for the United States House of
The Rayburn House Office Building, completed in early 1965, is the third of three office buildings constructed for the United States House of Photo: USCapitol/Wikimedia Commons · Public domain

The Orthodoxy Milestone

The move was precipitated by historic Shunto wage negotiations that delivered wage increases north of five per cent, satisfying the BoJ’s criteria for a sustainable wage-price dynamic. Yet the historic hike was delivered with exceptional caution, accompanied by pledges to maintain accommodative conditions. Exiting negative rates is a symbolic milestone, but Japan remains miles away from aggressive monetary tightening.

Oil pump on the peninsula Gnitz, Usedom, Mecklenburg-Vorpommern, Germany
Oil pump on the peninsula Gnitz, Usedom, Mecklenburg-Vorpommern, Germany Photo: Dietmar Rabich/Wikimedia Commons · CC BY-SA 4.0

The Bank of Japan’s exit from negative rates closed a seventeen-year chapter of monetary unorthodoxy, marking the definitive global retirement of negative interest rate policy.

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