The Bank of Japan does not exclude the possibility of abandoning negative rates

The head of the Central Bank of Japan, Kazuo Ueda, said that the regulator does not exclude the possibility of ending the policy of negative interest rates as soon as stable inflation at the level of 2% is reached.  

He also suggested that by the end of 2023, the central bank will probably have enough data to decide whether it is possible to abandon negative rates. 

Currently, the Central Bank of Japan keeps the short-term interest rate on deposits at minus 0.1% per annum. Ueda stressed that if the leadership of the central bank comes to the conclusion that the achievement of inflation goals is realistic even after the rejection of negative rates, it is ready to take this step.

Despite the fact that the key inflation indicator in Japan has exceeded 2% for more than a year, Ueda has repeatedly stressed the importance of maintaining an ultra-soft monetary policy until the bank is confident in the sustainability of 2% inflation. 

Ueda also noted that the bank will closely monitor the risks associated with a possible excess of inflation expectations, and added that wage growth is beginning to have an impact on prices for services. An important question remains whether wages will continue to rise next year. 

These comments by the head of the Bank of Japan caused a sharp strengthening of the yen against the dollar, and the yield of Japanese ten-year government bonds rose to the highest since 2014.