Boj Thinks About Ending Negative Rates

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Boj Thinks About Ending Negative Rates

Bank Of Japan (Boj) Thinks About Ending Negative Rates

According to sources, the policymakers from the Bank of Japan are now thinking about ending the era of negative interest rates for good. This development comes as the market is now expecting an increase in the annual wage (yearly).

If the negative rates come to an end, the BoJ will also have to rethink the stimulus program. The said program consists of buying riskier assets along with bond yield control to keep the economy afloat.

Wage Negotiations To Decide Interest Rate

However, an immediate shift might be far-fetched as the nine members of BoJ have yet to develop a consensus on the issue. The next meeting is due in the next few days, while the next one will take place on 25-26 April.

lot of BoJ policymakers are looking toward the annual wage negotiations between the unions and the big firms. Once the data is made available, the BoJ will be able to determine when it wants to step away from the massive stimulus.

If the outcome is major pay hikes, the chances of some action from the BoJ will likely increase. After all, the offers made by the big companies will also translate into other smaller companies throughout Japan.

The BoJ is hoping that an increase in wages will allow consumers to spend more money. As a result, an increase in the price and demand will take place, which is exactly what the BoJ needs after a long period of deflation.

If the outcome of wage negotiations is a good one, it means the BoJ can take action even before April's meeting. Otherwise, the major policy pivot from the BoJ will have to wait till the next meeting.

Another scenario is that some board members may decide to wait for the upcoming business sentiment survey before taking any sides. In that case, the economy will have to go through a few more weeks of negative interest rates.

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