BOJ Has Hiked at Last, But This Tiny Step Is No Liftoff
Totems of ultra-easy money have been retired in Japan. Just don’t expect this rate hike to be the start of a cycle.
Still on the launch pad.
Photographer: Richard A. Brooks/AFP/Getty Images
Japan’s decision to jettison negative interest rates is rich in symbolism. Deflation, which dogged the economy for a generation, has been dispatched. Workers are finally enjoying meaningful wage increases. Policymakers are no longer required to be defensive when they explain their country’s outlook. After a few false dawns, the nation has climbed out the hole it fell into after the property industry collapsed three decades ago. You might even think this marks the end of a certain exceptionalism.
The substance of the steps — Japan also did away with formally controlling long-term bond yields — warrants less champagne. The increase in the main rate is minuscule by the global standards of central banking: from minus 0.1%, where it has stood since 2016, to around zero. By the time the Bank of Japan got around to abolishing it on Tuesday, the sub-zero rate applied to a minute slice of real-life lending. Caveats abounded.