The Lombard Review
World

Japan ends negative rates

First BoJ hike in 17 years

The Bank of Japan head office, Chuo, Tokyo
The Bank of Japan head office, Chuo, TokyoPhoto: katorisi / Wikimedia Commons, CC BY-SA 3.0
1 min read Data: BoJ 0–0.1%

In a historic policy shift on 19 March, the Bank of Japan officially terminated seventeen years of unconventional monetary experimentation. By lifting its benchmark overnight rate from minus 0.1 per cent into a range of zero to 0.1 per cent, abandoning Yield Curve Control, and halting ETF purchases, Governor Kazuo Ueda led the world's last negative-rate central bank back to orthodoxy.

Lower Manhattan seen from Jersey City
Lower Manhattan seen from Jersey CityPhoto: King of Hearts / Wikimedia Commons, CC BY-SA 4.0

The Orthodoxy Milestone

The move was precipitated by historic Shunto wage negotiations that delivered wage increases north of five per cent, satisfying the BoJ’s criteria for a sustainable wage-price dynamic. Yet the historic hike was delivered with exceptional caution, accompanied by pledges to maintain accommodative conditions. Exiting negative rates is a symbolic milestone, but Japan remains miles away from aggressive monetary tightening.

A worker assembling rebar at a construction site
A worker assembling rebar at a construction sitePhoto: Tomas Castelazo / Wikimedia Commons, CC BY-SA 3.0

The Bank of Japan’s exit from negative rates closed a seventeen-year chapter of monetary unorthodoxy, marking the definitive global retirement of negative interest rate policy.