Japan's Central Bank Raises Interest Rates

SOURCE www.nbcnews.com
Japan's central bank raised interest rates for the first time since 2007, ending the negative rates regime due to robust wage gains. The bank also announced changes to its policies on bond purchases and quantitative easing.

Key Points

  • BOJ raised short-term interest rates from -0.1% to 0% to 0.1%
  • Abolished yield curve control policy for 10-year Japanese government bonds
  • Will reduce purchases of corporate bonds and stop purchases of ETFs and J-REITS
  • Continues to purchase Japanese government bonds at same amount

Pros

  • Positive sign of robust wage gains in Japan
  • Transition from negative rates regime may be indicative of economic strength

Cons

  • Potential impact on borrowing costs for businesses and consumers
  • Uncertainty in the market post-policy change