Japan’s central bank i.e. Bank of Japan has increased its prime lending rate on Tuesday for the first time in 17 years to boost the country’s economy. With this decision of the Bank of Japan, the long-running policy of negative interest rates has ended. According to language news, the Bank of Japan has increased the short-term interest rate from negative 0.1 (-0.1) percent to 0.1 percent in its policy meeting. Interest rates have increased for the first time since February 2007.
Japan escaped deflationary trend
According to the news, the central bank had set an inflation target of two percent, indicating that Japan has finally escaped the deflationary trend. Unlike inflation, prices start falling in deflation. Bank of Japan chief Kazuo Ueda had earlier said the bank would review its negative interest rate if the two percent inflation target is met. The central bank also changed other aspects of its monetary policy, eliminating the yield curve control program and purchases of exchange-traded funds.
Promise to buy long-term government bonds
However, the Bank of Japan also promised to buy long-term government bonds as needed, and said it would keep conditions favorable for now. The bank’s decision weakened the Japanese currency slightly, as traders took note of the Bank of Japan’s cautious comments indicating it would remain cautious about further rate hikes. On the other hand, after this decision of the bank, Japan’s Nikkei 225 index closed above 40,000 on Tuesday.
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