Raise interest rates for the first time in 17 years! Japan announced： bid farewell to the ＂negative interest rate era＂! The decline of the yen widened, and the Nikkei 225 index turned from falling to
According to CCTV news,The Bank of Japan ended its two-day monetary policy meeting on March 19th and decided to lift the negative interest rate policy.The Bank of Japan set the policy interest rate in the range of 0% to 0.1%. This is the first time that the Bank of Japan has raised interest rates in 17 years since February 2007.
Japan began to implement the negative interest rate policy in February 2016, when the Bank of Japan reduced the interest rate of commercial banks’ excess reserve deposits from the previous 0.1% to -0.1%.
In addition, the Bank of Japan announced that it will cancel the yield curve control (YCC) policy and will continue to purchase government bonds at roughly the same amount as before. The Bank of Japan announced that it would cancel the purchase of ETFs and real estate investment trusts (REITs).
The Bank of Japan is expected to temporarily maintain a loose monetary environment;If the long-term interest rate rises rapidly, it may increase the purchase amount of Japanese government bonds, for fixed interest rate purchase operation. The Bank of Japan will continue to buy Japanese government bonds, and the scale is basically the same as before.
After the news was announced, the yen fell against the US dollar for a short time. As of 11: 41, the yen hit an intraday low of 149.922 against the US dollar.
At the same time, the Nikkei 225 index turned red, up 0.53%; Japanese 10-year government bond futures rose 30 basis points to an intraday high.
Mary Nicola, an analyst, said that although Japan has abolished negative interest rates and YCC, it is still difficult for the yen to gain momentum. The fact that the Bank of Japan will continue to buy bonds will not enable the yen to continue to break through the recent range. The fate of the yen is in the hands of the Federal Reserve’s interest rate decision on Wednesday. Because the real interest rate will remain negative, the upside of the yen is also limited.
Earlier, some Japanese media analysts said that the Bank of Japan’s strong confidence in withdrawing from ultra-loose this time was mainly due to the statistical results of "Spring Fight" (spring labor negotiations) announced last week.
According to CBN, the preliminary results of the "Spring Fight" in 2024 announced by Japan on March 15th show that the annual wage increase won by Rengo, Japan’s largest trade union, reached 5.28%, higher than the previous year’s 3.8% and the biggest increase in 30 years.
The annual "Spring Fight" has long been a stage for the game between employers and employees in Japan. Compared with previous years, the result of this year’s "Spring Fight" is more concerned by the market, because it will become an important marginal variable affecting the interest rate meeting held by the Bank of Japan on March 18-19.
In January, Bank of Japan Governor Kazuo Ueda stressed at a press conference the need to focus on the results of the "Spring Fight" negotiations in March, saying that if a virtuous circle between wages and inflation is confirmed, easing policies including negative interest rates will be considered, because higher wages can bring inflation in the service industry and real consumption growth.
At the end of last month, Takada Chuang, a member of the Bank of Japan’s nine-member policy committee, said that the goal of stabilizing the inflation rate at 2% due to rising wages "has finally come to a promising stage". Another member, Junko Nakagawa, also said in his speech last week that Japan is now moving forward towards the goal of 2% price stability and can look forward to a virtuous circle of wages and prices.
It is worth noting that on February 15th this year, the Cabinet Office of Japan announced the preliminary survey results of Japan’s gross domestic product (GDP) in 2023. The data shows that in 2023, Japan’s real GDP increased by 1.9% year-on-year, and the nominal GDP reflecting rising prices increased by 5.7%. In 2023, Japan’s nominal GDP was 591.482 trillion yen, or about 4,210.6 billion US dollars. Germany’s nominal GDP in 2023 was converted into US$ 4,456.1 billion. This means that Japan’s nominal GDP has dropped from the third place in the world to the fourth place, being surpassed by Germany.
According to the Economic Daily,After the data was released, the Japanese government and economic circles voiced one after another, and fixed the main reasons why Japan’s nominal GDP was surpassed by Germany in exchange rate and high inflation rate in Germany, trying to "pick out" the problems of Japan’s own economic development. Lin Fang, Chief Cabinet Secretary of Japan, said at the press conference on February 15th that the Japanese government will take strong measures to raise wages, and at the same time, through payment and fixed tax reduction, it will effectively create an environment in which income growth exceeds price increase to expand consumption. In addition, Lin Fangzheng also stressed that the GDP converted into US dollars will be greatly affected by the price and exchange rate movements, so more attention should be paid when evaluating the increase or decrease.
Although some views of Japanese government and economic circles try to regard exchange rate and price as the main reasons for Japan’s nominal GDP being overtaken by Germany, the analysis believes that the depreciation of the yen and price are only short-term factors that lead to Japan’s nominal GDP ranking being overtaken, and the deeper reason is that Japan’s own economic development is in many difficulties. The results of the quick report of GDP in the fourth quarter of 2023 released by the Cabinet Office show that excluding price changes, Japan’s real GDP in the fourth quarter decreased by 0.1% compared with the third quarter, and the annualized rate decreased by 0.4%, which was a negative growth for two consecutive quarters. Among them, personal consumption decreased by 0.2% and equipment investment decreased by 0.1%.
In fact, deflation after the collapse of the bubble economy still has a lasting impact on Japanese society. Personal consumption and equipment investment, as the pillars of domestic demand, failed to recover in the post-epidemic period, which hindered Japan’s economic development.
In addition, personal consumption is continuously affected by high prices and low real wages. Some people in the economic circles believe that the actual situation of personal consumption in Japan in the fourth quarter of 2023 may be worse than the GDP statistics. According to the consumption activity index calculated by the Bank of Japan based on supply-side data, the actual consumption activity index in the fourth quarter of 2023 decreased by 1.2% month-on-month, the largest decline since the first quarter of 2022.
Although the wage increase in Japan was improved in the labor negotiations in the spring of 2023, the monthly labor statistics released by the Japanese Ministry of Health, Labor and Welfare on February 6 this year showed that the real wage income in Japan decreased by 1.9% year-on-year after deducting the price increase factor in December 2023, which was a decline for 21 consecutive months. According to data from the Ministry of Internal Affairs and Communications of Japan, in 2023, Japan’s national consumer price index (CPI) was 105.2, a year-on-year increase of 3.1%, the highest level since 1982. According to a recent survey by Imperial Japan Database Company, the price of 10,000 to 15,000 kinds of food in Japan is expected to increase this year. Some people believe that high prices and falling real wages will further hinder the Japanese people’s willingness to consume, the real purchasing power of the people will further decline, and the risk of being unable to get rid of stagflation will increase, which will step on the "brake" for Japan’s economic development.
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edit| Sun Zhicheng Gai Yuanyuan
Proofread |Peng Cheng
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