ALBAWABA – Central Bank of Japan has defied its 2016 negative interest rate policy, increasing its short-term interest rates for the first time in 17 years from 0 percent to 0.1 percent, which sparked a sell-off that slipped the Yen against major currencies.
In 2016, the Bank of Japan made the unconventional decision to lower borrowing rates to zero, with Negative interest rates meaning that borrowers may get loans at very low rates, which incentivizes them to spend, while depositors pay to leave their funds within a bank, an attempt to revive lending and borrowing in order to boost the nation's flagging economy.
The yen fell abruptly after the news to levels of more than 150 against the US dollar, a price point that has historically provoked Japanese government action according to CNBC. However, Ueda said he refuses to comment on short-term currency moves, noting “if currency moves have a big impact on our economic and price forecasts, we will stand ready to take an appropriate monetary policy response.”
The economy of Japan has lately started blossoming more rapidly, as according to the New York Times, inflation has seen a boost after being dormant for a few years, with unprecedented hikes in wages to support it, causing the central bank to follow more major banks in increasing interest rates in face of growing inflation.
“If the likelihood heightens further and trend inflation accelerates a bit more, that will lead to a further increase in short-term rates,” said BOJ Governor Kazuo Ueda, according to Reuters, while noting that the bank has no plans of a substantial interest rate hikes, saying it “anticipates that accommodative financial conditions will be maintained for the time being.”
