Bank of Japan Governor Kazuo Ueda proposed ending negative interest rates as chair of the policy-setting board, public broadcaster NHK reported as per news agency Reuters marking a historic shift. The move could be Japan's first interest rate hike in 17 years but will still keep interest rates stuck around zero amid fragile economic recovery.
Read more: Meet Yotta Data Services' Sunil Gupta: Man behind Nvidia's biggest India AI bet
This makes Japan the last central bank to exit negative rates ending an era in which policymakers propped up growth through cheap money and unconventional monetary tools.
Read more: Longi layoffs: World's largest solar manufacturer letting go 5% of employees
Izumi Devalier, head of Japan economics at BofA Securities, said, “This would be the first rate hike in 17 years, so it has a lot of symbolic significance. But the actual impact on the economy is very small. We would not expect a substantial rise in funding costs or households mortgage rates.”
Top points you need to know on this latest development:
Read more: Adani Group on reported bribery probe by US prosecutors: ‘False’
- Following this, the Bank of Japan will significantly reduce top-end of the range of the amount of bonds that it is planning to buy each time at its bond buying operation.
- Japan's central bank cut the top-end of the range for purchases of 5-10 year JGBs to 550 billion yen from 900 billion yen.
- For 3-5 year bonds, it cut the top-end to 500 billion yen from 750 billion yen.
- The central bank will also conduct bond buying operations at the same frequency across the curve as before and has in the past conducted aggressive bond buying operations to defend its ultra-low rate policy.