The Lombard Review

Japan ends negative rates

The Japan Coast Guard patrol vessel Akitsushima (PLH-32) in the port of Yokohama.
The Japan Coast Guard patrol vessel Akitsushima (PLH-32) in the port of Yokohama. Photo: Matthide127/Wikimedia Commons · CC0
By The Lombard Review
1 min read

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.

The East Front of the United States Capitol, viewed straight on from the east.
The East Front of the United States Capitol, viewed straight on from the east. Photo: Beethoven/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.

An LNG tanker at anchor off Haugesund, Norway.
An LNG tanker at anchor off Haugesund, Norway. Photo: Gordon Leggett/Wikimedia Commons · CC BY-SA 4.0

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.

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