Yen depreciates sharply, BoJ may end negative interest rate policy

Bank of Japan (BoJ) Governor Kazuo Ueda said the BoJ could end its negative interest rate policy when it is close to achieving its 2% inflation target. This signals the possibility of an interest rate hike, in the context of the Yen's sharp depreciation.

The Yen has depreciated sharply, and the BoJ may end its negative interest rate policy. (Source: CNN)

“Once we are confident that Japan will see sustained inflation growth along with wage growth, we can take various actions,” Ueda said in an interview on September 6. “If we judge that Japan can achieve its inflation target even after ending negative interest rates, then we will do so,” he added.

The BoJ currently targets short-term interest rates at minus 0.1%, while capping 10-year government bond (JGB) yields around zero as part of efforts to revive the economy and achieve its target on a sustainable basis. With inflation running above its 2% target for more than a year, markets are speculating that the BoJ will soon start raising interest rates.

But Mr. Ueda stressed the need to maintain ultra-loose monetary policy until the BoJ is confident that inflation will remain sustainable at around 2 percent thanks to solid demand and wage growth.

He said the BoJ would be "patient" and that "while Japan is showing nascent positive signs, we are not yet at our target".

He said the BoJ would not turn a blind eye to the risk of inflation exceeding expectations. Wage increases are starting to push up prices for services and it will be important to see whether wages continue to rise next year.

“We cannot rule out the possibility that we will have enough information and data by the end of the year,” he said, referring to the timing of the end of negative interest rates. Under a negative interest rate policy, banks and other financial institutions pay interest on deposits of excess money — more than they are required to keep for safety — with the central bank.

Source: https://baoquocte.vn/dong-yen-mat-gia-manh-boj-co-the-cham-dut-chinh-sach-lai-suat-am-241546.html