The Bank of Japan (BoJ) ends the era of negative interest rates with its first hike since 2007

After concluding their two-day monetary policy meeting on Tuesday, the Members of the board of directors of the Bank of Japan (BoJ) decided to raise the interest rate by 10 basis points (bp), from -0.1% to 0% for the first time since 2007.

The central bank ended an era of negative interest rates that began in 2016. The decision was in line with market expectations.

In its statement, the BoJ announces that it is raising its overnight interest rate from 0% to 0.1%, and will apply a rate of 0.1% to all excess reserves deposited in the Bank of Japan.

The entity will continue its JGB purchases for approximately the same amount as before and will gradually reduce the amount of corporate bond purchasess with the intention of suspending them in approximately one year.

The BoJ has made the decision on the long-term purchase of JGB by 8 votes to 1, while it has made the decision on the purchase of long-term non-JGB assets by unanimous vote.

The vote on the treatment of new loan disbursements under the measure to provide funds to stimulate bank lending has been unanimous

The Bank of Japan will nimbly increase JGB purchases regardless of the scheduled monthly purchase amount.

The entity announces a change in the monetary policy framework. The virtuous circle between wages and prices has been evaluated. The price stability target of 2% was considered to be achieved in a sustainable and stable manner towards the end of the projection period.

The QQE, YCC and negative rate policy are considered to have fulfilled their functions.

With a price target of 2%, the Bank of Japan will implement monetary policy accordingly.

Given the current outlook for economic activity and prices, the BoJ anticipates that accommodative financial conditions will remain for the time being..