Japan exits negative interest rate policy on record wage hikes

With salaries rising by 5.28% on average, the BOJ sees cycle of wages and prices more “solid”.

Japan has revised its negative interest rate policy following recent wage hikes that saw the highest salary increases in three decades.

As of March 19, the Bank of Japan (BOJ) now recommends the short-term interest rate (uncollaterised overnight call rate) to remain at around 0% to 0.1%, up from negative 0.1% to 0% previously.

In a decision published online, the BOJ noted that “the virtuous cycle between wages and prices has become more solid.” 

“It considers that its large-scale monetary easing measures have fulfilled their roles, including the negative interest rate policy and the yield curve control,” the BOJ said.

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The end of the negative rate policy comes at the heels of the Shunto, or the spring wage negotiations. In mid-March, Japanese firms reportedly agreed to wage increases averaging 5.28%, according to the Japanese Trade Union Confederation (Rengo), the highest increase in about 33 years.

The BOJ said that it will continue its JGB purchases in the same amount as before.