Historic Change from Bank of Japan

End Of Negative Rates

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The Bank of Japan ended eight years of negative interest rates and other remnants of its unorthodox policy today, making a historic shift away from trying to input growth with decades of massive monetary stimulus.

You Might Be thinking what’s up with Negative Interest Rates? Well, You pay interest to deposit your money at banks instead of receiving it. And this has been for decades in Japan.

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The Bank said it would guide the interest rates to remain in a range of about zero to 0.1 per cent, making it the last Central bank to end the use of negative rates as a monetary policy tool.

Its Last rate was minus 0.1 per cent. Only Japan was following this Negative interest rate thing in the whole world.

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Significance

The Bank of Japan turned to negative interest rates in 2016 as it tried to encourage banks to lend more to generate spending and contain the risks of a global economic slowdown.

But were they successful? Well kinda.

Despite the return to positive interest rates, Bank officials do not see the first increase as a signal that more will quickly follow.

Inflation, sparked by a rise in imported energy and food prices, is well beyond its peak. Core inflation, which excludes volatile fresh food prices, slowed in January for the third straight month.

Economic Actions in Japan

More companies are also passing on inflation costs to consumers and labour shortages contribute to higher wages.

Investors have also grown more confident in the economy’s prospects. In February the Nikkei 225 stock index finally surpassed the level reached 34 years ago.

“Given the current outlook for economic activity and prices, the bank anticipates that accommodative financial conditions will be maintained for the time being,” The Bank of Japan said, Source- FT

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