Bank of Japan abolishes negative interest rate in first hike in 17 years | business and economy

Japan's central bank is beginning to unwind one of the world's most aggressive monetary easing programs.

The Japanese central bank has abolished its negative interest rate and is finally beginning to unwind one of the most aggressive monetary easing programs in the world.

The Bank of Japan on Tuesday raised its key short-term interest rate to zero to 0.1 percent from -0.1 percent – the first such hike in 17 years.

Officials “assessed the virtuous cycle between wages and prices and concluded that it became apparent that the two percent price stability target would be achieved in a sustainable and stable manner towards the end of the forecast period of the January 2024 forecast report,” the statement said BOJ said.

The central bank also said it would end other unorthodox measures, including its bond yield curve control program and purchases of exchange-traded funds (ETFs).

The moves come after Japan's largest union won a 5.3 percent wage increase from employers on Friday, the highest since 1991.

BOJ chief Kazuo Ueda has repeatedly said the bank would review its negative interest rate and other easing measures if inflation hits 2 percent and wages rise.

For years, the BOJ bucked the global trend of higher interest rates caused by rising inflation in the wake of Russia's invasion of Ukraine.

Japanese politicians' ultra-loose policies were aimed at reversing several “lost decades” of stagnation and deflation triggered by the collapse of a massive asset bubble in the early 1990s.

Japan officially lost its place as the world's third-largest economy last month, falling behind Germany.