The Bank of Japan building in Tokyo. The central bank has raised its benchmark borrowing rate for the first time in 17 years
Japan’s central bank raised its benchmark borrowing rate for the first time in 17 years – ending the global experiment with negative interest rates.
The increase ends eight years of sub-zero rates as the Bank of Japan aimed to stimulate the moribund economy.
It is the last central bank to end negative rates, a policy that has also been pursued by the European Central Bank, as well as counterparts in Switzerland, Sweden and Denmark.
Since then, surging inflation across much of the developed world has forced many central banks to reverse course with a rapid series of hikes.
‘The days of ultra-low rates are over,’ said Agustin Carstens, boss of the Bank for International Settlements, a club of global central banks, earlier this week.
The era began in the wake of the global recession and eurozone debt crisis more than a decade ago.
Negative rates affected the money held by commercial banks in central bank accounts – meaning that rather than earning interest they were charged for doing so.
The idea was to encourage them to lend those funds into the real economy and kickstart growth.
Deutsche Bank analyst Jim Reid said: ‘Debate will rumble on for many years as to whether it was a good idea or one that prolonged the economic pain.’
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