BOJ finally end negative interest rates

Japan’s central bank (BOJ) has ended what could be considered one of the most aggressive expansionary monetary policy programmes. The BOJ raised its short-term policy rate from -0.1% to between 0-0.1% on deposits held with the bank. This brings to an end negative rates, charging banks for money held at the BOJ, which have been in operation since 2016 – see image from Trading Economics.

The BOJ see the wage increases of 5.28% hopefully inducing more consumer spending and ultimately higher prices ending a long period of deflationary pressure. See mind map on Monetary Policy.

However even though interest rates are into positive territory monetary policy still remains very loose (expansionary) and borrowing and mortgage costs are not likely to rise by a large amount. The very loose monetary policy has been a key factor the decline of the Yen v US dollar which had helped exporters but made imports more expensive therefore putting pressure on households. This is a very good example of macro policy that could be included in A Level essays. Below is a news item from ABC Australia explaining the rise.

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