Bank of Japan Governor Kazuo Ueda has proposed ending the negative interest rate policy at the monetary policy meeting on March 19. If finalized, this decision will mark the first time that interest rates in Japan have been raised since 2007.
Japanese media reported late on the night of March 18 that the Bank of Japan is preparing to announce the withdrawal of its large-scale monetary easing policy. The policy interest rate is expected to be raised from negative to 0%-0.1%, effectively ending the negative interest rate policy. Additionally, the YCC framework, which targets long-term interest rates, will be abolished.
This potential shift in policy comes sooner than expected, with economists previously predicting an increase in April. The Bank of Japan has been implementing a negative interest rate policy since 2016, making it the only major economy to do so.
The decision to end the negative interest rate policy is based on positive economic indicators, including a significant increase in annual wages and progress towards achieving the 2% inflation target. Members of the Bank of Japan’s policy committee have expressed confidence in reaching price stability and creating a virtuous cycle of wages and prices.
If the Bank of Japan moves forward with ending the negative interest rate policy, it would signify a major shift in monetary policy and signal a potential increase in interest rates for Japan for the first time in 17 years.