Japan finally raises interest rates as inflation wish comes true
Japan’s central bank has raised the cost of borrowing for the first time in 17 years.
The Bank of Japan (BOJ) increased its key interest rate from -0.1% to a range of 0%-0.1%. It comes as wages have jumped after consumer prices rose.
In 2016, the bank cut the rate below zero in an attempt to stimulate the country’s stagnating economy.
The hike means that there are no longer any countries left with negative interest rates.
The BOJ also abandoned a policy known as yield curve control (YCC), which saw it buying Japanese government bonds to control interest rates.
YCC policy has been in place since 2016 but has been criticised for distorting markets by keeping long-term interest rates from rising.
In a statement announcing the decision, the BOJ said it will keep buying “broadly the same amount” of government bonds as before and ramp up purchases in case yields rise rapidly.
Expectations that the BOJ would finally raise rates had been growing since Governor Kazuo Ueda took office in April last year.
The latest official figures showed that even though the rate of price rises has been slowing, Japan’s core consumer inflation held at the bank’s 2% target in January.