The Bank of Japan has raised interest rates for the first time since 2007, ending the world’s longest running monetary easing campaign.
The central bank raised its short-term interest rates to a new range of 0% to 0.1%. The rate had previously been negative at -0.1%.
Japan had been running a negative interest rate regime since 2016.
The Bank of Japan also announced that it is abandoning its yield-curve controls and ending most of its asset purchases that were also aimed at monetary policy easing.
The long-term policy easing was put in place to help fight deflation, which had long gripped the Japanese economy.
While the Bank of Japan signalled that it is now changing course, it stressed that it’s not about to begin aggressively raising interest rates, noting that the world’s fourth-largest economy is seeing only “fragile growth” currently.
The central bank also said that it would stop buying exchange-traded funds (ETFs) and real estate investment trusts (REITS) as part of its new policy regime.
The yen currency weakened against the U.S. dollar and yields on 10-year Japanese government bonds fell following news of the rate increase. The Nikkei stock exchange rose to end what was a volatile trading session.
The inflation rate in Japan was 2.1% in January of this year. Like other central banks, the Bank of Japan targets inflation at an annualized rate of 2%.
