Japan: the end of an era

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The Bank of Japan (BoJ) has lifted its policy rate to between zero and 0.1%. The shift makes the BoJ the last central bank to exit negative rates. It has also put an end to some other unconventional policy easing measures such as yield curve control (to keep 10-year yields around zero) and purchasing ETFs and mortgage-backed securities. Its government bond purchases will continue.


The change in direction was undoubtedly triggered by a combination of upwardly revised fourth-quarter growth and initial indications from the annual shunto wage negotiations that salaries are set to accelerate further.

BoJ Governor Kazuo Ueda took all possible precautions in his speech to prevent the measures from destabilising markets. Going forward, the central bank is likely to move slowly given the underwhelming domestic demand figures revealed in recent economic data. On a brighter note, the PMI services index hit 54.9 in March, one of its highest levels in fifteen years. The market is currently pricing in short-term rates of 0.31% for the end of 2024. While this figure is decidedly low, it is higher than it was before the meeting.

What remains to be seen is whether this decision marks a definite end to the BoJ’s experiment with negative rates.


Written on March 22, 2024. This is not an investment advice. Opinions subject to change.

See also: https://latribune.lazardfreresgestion.fr/en/european-banking-sector-in-good-health/


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