Japan exits world's last negative-rate regime in landmark policy shift - Hindustan Times
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Japan exits world's last negative-rate regime in landmark policy shift

Mar 19, 2024 09:37 AM IST

This makes Japan the last central bank to exit negative rates ending an era.

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.

The Japanese flag flies over part of the Bank of Japan (BoJ) headquarters complex in central Tokyo. Japan's central bank was widely expected to scrap its maverick negative interest rate policy and hike borrowing costs.(AFP)
The Japanese flag flies over part of the Bank of Japan (BoJ) headquarters complex in central Tokyo. Japan's central bank was widely expected to scrap its maverick negative interest rate policy and hike borrowing costs.(AFP)

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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.

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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:

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  1. 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.
  2. 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.
  3. For 3-5 year bonds, it cut the top-end to 500 billion yen from 750 billion yen.
  4. 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.

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