2024.03.1906:25:00UTC+00Bank Of Japan Raises Rates For First Time In 17 Years

The Bank of Japan raised its interest rates for the first time in nearly two decades and became the world's last central bank to end negative rates amid signs that inflation is strengthening.

The BoJ Policy Board, led by Governor Kazuo Ueda, decided in a 7-2 vote to raise the overnight interest rate around 0 to 0.1 percent from minus 0.1 percent.

The central bank also decided to end its yield curve control, or YCC, policy that capped the interest on the 10-year Japanese government bonds, or JGBs, around zero.

Markets had widely expected the BoJ to exit its unorthodox and ultra loose policy measures that were adopted in 2016 to tackle the deeply entrenched deflation.

This was the first hike since 2007 and came after recent data showed inflation picking up. In recent weeks, many BoJ rate-setters commented that the 2 percent inflation goal was in sight.

Expectations of an exit from the ultra loose monetary policy strengthened further after the annual 'shunto' wage negotiations last week saw the country's major companies agreeing labor unions' demand for some of the biggest pay hikes in decades.

"At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan assessed the virtuous cycle between wages and prices, and judged it came in sight that the price stability target of 2 percent would be achieved in a sustainable and stable manner...," the BoJ said in a statement.

The bank said it will conduct monetary policy "as appropriate, guiding the short-term interest rate as a primary policy tool" and with the price stability target of 2 percent.

"Given the current outlook for economic activity and prices, the Bank anticipates that accommodative financial conditions will be maintained for the time being," the BoJ added.