Bank of Japan announces first interest rate increase in 17 years

The Bank of Japan (BOJ) announced on Tuesday the end of its negative interest rate policy and increased borrowing costs for the first time in 17 years.

“The Bank will encourage the overnight unsecured interest rate to remain at around 0 to 0.1 percent,” the central bank said in a statement, moving it from its previous level of negative 0.1 percent.

BOJ Governor Kazuo Ueda is expected to explain the decision at a press conference later on Monday.

It was the first interest rate increase in Japan since 2007.

While many Western central banks kept interest rates at zero or near zero for about 15 years after the financial crisis of 2007 and 2008, Japan’s was already moving in that direction by the mid-1990s.

This was both as part of an attempt to encourage spending and inflation in an aging society with negative population growth, and also in an attempt to keep the country’s debt payments manageable, with Japan being the most indebted country on the planet by percentage of GDP.

In recent months, for the first time in years, inflation in Japan has approached the Bank of Japan’s 2% target level, leading to speculation in recent weeks that a rate change would be likely in March or at the Bank of Japan meeting. April BOJ.

ss/msh (Reuters, AFP)