The Bank of Japan (BoJ) has raised its key short-term interest rate to around 0% to 0.1%, marking its first interest rate hike in 17 years. This move is in response to inflation rates exceeding the central bank’s target of 2% and the biggest wage hike in over three decades by the country’s largest corporations.
BoJ’s rate hike: Yay for savers, nay for borrowers!
The Bank of Japan has also terminated yield curve control for 10-year government bonds and discontinued the purchases of ETF and Japan real estate investment trusts (J-REITs). Furthermore, the bank will be slowly reducing the pace of corporate bond buying before completely stopping it in about a year.
While market expectations were met by the rate hike, two of the BoJ’s nine board members, Toyoaki Nakamura and Asahi Noguchi, dissented. Despite this, the bank has stated that it would make nimble responses, such as increasing the amount of JGB purchases in case of a rapid rise in long-term rates.
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The BoJ’s decision to end its eight-year-long negative interest rates policy has been met with mixed reactions from experts. Some argue that this move is a sign of the central bank’s confidence in the country’s economic recovery while others believe that it may lead to a slowdown in borrowing and spending.
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