BANK OF JAPAN MAKES HISTORIC SHIFT – BOJ moves away from ultra-loose monetary policy

The Bank of Japan (BOJ) ended eight years of negative interest rates and other remnants of its unorthodox policy, making a historic shift away from trying to reflate growth with decades of massive monetary stimulus.

While the move was Japan’s first interest rate hike in 17 years, it still keeps rates stuck around zero as a fragile economic recovery will force the central bank to go slow on any further rise in borrowing costs, analysts say.

The shift makes Japan the last central bank to exit negative rates and ends an era in which policymakers around the world sought to prop up growth through cheap money and unconventional monetary tools.

Speaking at the post-meeting news conference, BOJ Governor Kazuo Ueda said a 0.1% increase in short-term interest rates won’t largely affect deposits or lending rates, and the central bank will keep buying the same amount of government bonds as before. He also added that the central bank would consider responding through monetary policy if currencies have a sizable effect on its outlook for the economy and prices.