On March 19th, the Bank of Japan (BoJ) announced it would set a new policy rate between 0 percent and 0.1 percent, with the board voting 7-2 in favor of the increase. The rate increase is the first time in 17 years that Japan has increased its interest rates. It also marks the end of eight years of negative rates and the country’s stimulus program.
BoJ governor Kazuo Ueda said that they “judge that achieving the goal of sustainable 2% inflation has come within view” and that “large-scale monetary easing policy served its purpose.”
The board also voted to remove the country’s yield curve control and ETF purchase program while also voting to continue buying long-term government bonds. The BoJ indicated that any financial conditions it sets will be accommodating for the near future, and Ueda did not indicate the BoJ has plans for future rate hikes.
Ueda said that 2 percent inflation is a long-term goal and that “considering the gap, I think we will conduct normal policy as I mentioned earlier, keeping the importance of maintaining an accommodative environment in mind.”
