Japan raises policy interest rates for first time in 17 years – BBC News Thailand

Japan is the last country to pursue monetary policy through negative policy interest rates.

The Bank of Japan (Bank of Japan: BOJ ) announced a hike in the policy interest rate from -0.1% to 0%-0.1%.

In 2016, the Bank of Japan cut interest rates below zero to stimulate the stagnant economy.

This increase means that no other country in the world implements monetary policy with negative interest rates.

A negative interest rate policy refers to a situation in which people pay banks if they deposit their money. Such policies are used in many countries to encourage people to spend their money instead of leaving it in banks.

The Bank of Japan scrapped a policy known as “Yield Curve Control (YCC)” in which the Bank bought government bonds to control interest rates.

The Bank of Japan has implemented the YCC since 2016, but it has been criticized for distorting markets by raising long-term interest rates.

In a statement on the decision, the BOJ said the bank would continue to buy government bonds. “In the same proportion” and buy more if there is a sharp increase in yield.

Many have expected the BOJ to raise interest rates since Bank of Japan Governor Kazuo Ude took office in April last year.

The latest official figures reflect that. Although the price level of goods and services will increase at a slower pace. But the core inflation rate in January this year is still around 2%, which is the bank's target inflation rate.

The decision to raise interest rates comes as Japan's big private companies raise employee salaries to cover rising living costs, said Nobuko Kobayashi BB of consultancy EY-Parthenon. told C.

Earlier last month, Japan's biggest companies agreed to raise employee salaries by 5.28%, the biggest increase in more than three decades.

Wage levels in Japan have remained stable since the late 1990s because prices of goods and services have risen very slowly. Or sometimes it is reduced

But Kobayashi said a return to inflation in Japan could be both good and bad news for the economy.

“It would be good news if Japan stimulated domestic production and demand but it would be bad news if inflation remained stable due to external factors such as war and disruption of production lines.”

Looking Ahead The Bank of Japan has signaled that there will be no interest rate hikes in the near term. That's because the bank believes “accommodating financial conditions will continue.”

“Inflation is slowing and unions will push for smaller wage increases in next year's negotiations,” said Marcel DeLiant of research firm Capital Economics.

“With wage growth reaching a record high this year, we expect inflation to be below the Bank of Japan's target by the end of the year. Therefore, there is no need for the central bank to raise the policy interest rate any further,” he said.

Last February, Japan's Nikkei 225 stock market index finally reached its all-time high, breaking a record set 34 years ago.

This month, Japan also avoided entering a tech recession. After correcting and updating the economic growth data numbers

The numbers were reviewed and found that gross domestic product (GDP) grew by 0.4% in the final three months of 2023, compared to the final quarter of the previous year.

Central banks around the world have cut interest rates during the pandemic crisis to counter the negative impact of border closures and lockdowns.

At that time, some countries such as Switzerland, Denmark and the European Central Bank adopted a negative interest rate policy.

Since then central banks around the world such as the Federal Reserve (Fed) and the Bank of England have raised interest rates sharply. Increase in prices of goods and services should be controlled