The Bank of Japan raised interest rates for the first time in 17 years

The Bank of Japan (BoJ) decided this Tuesday to raise short-term reference interest rates to 0.1%, the first measure of this type in 17 years, in addition to withdrawing other stimuli that it applied within its extensive monetary flexibility program.

The monetary policy board of the japanese central bank he made this decision in his meeting which concluded this Tuesday, by analyzing “the virtuous circle” of wage and price increases in the fourth world economy and considering that it is now possible to achieve the objective of an inflation of 2% per year “in a sustainable and stable manner”.

In addition to the increase in rates, which until now remained at -0.1%, the BoJ has decided to end its policy of controlling 10-year government bond yields and interrupt purchases of exchange-traded funds (ETFs) and real estate investment funds (REITs).

Bank of Japan: what were the reasons for taking this measure

The entity considers that its “policy of monetary easing quantitative and qualitative”, its control of public Treasury bonds and negative interest rates “have fulfilled their functions”, according to the document adopted at the end of the meeting.

The Japanese central bank He added that he will continue to direct his policy monetary “towards the goal of 2% price stability”, and that will continue to guide short-term interest rates “as the main tool” in response to the price evolution and the economic situation.

Given the current outlook for economic activity and inflation, the Bank of Japan foresees that “accommodative financial conditions will remain for some time”.

The change of course of Boxwood was approved at its monetary policy meeting by 7 votes in favor and 2 againstand had already been anticipated by the majority of analysts.

Why the decision made by the Bank of Japan is important

He Boxwood It was the only central bank among the major world economies which has maintained ultra-low interest rates, if any, since 2016.

The Japanese entity decided that year put interest rates negative short-term reference with a view to promoting credit and boosting the economy.

Also in 2016, it introduced its Treasury yield curve control program, with a view to guiding them toward around 0%. and thus keep financing costs low of the high state debt.

For his decision today, the Boxwood has taken into account that the consumer price index has remained above 2% for months – for fiscal year 2024, the entity foresees an increase of 2.4% – as well as the average salary increase of 5.28 % with which the annual negotiations between the main Japanese unions and employers have been settled.