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End of an Era - Japan Moves away from Negative Interest Rates

Graham Watson

19th March 2024

A historic moment: for the first time since 2007, Japan has raised monetary policy interest rates and they're no longer negative. Rates have gone from -0.1% to between 0.0 and 0.1% in response to a rise in inflation.

However, you have to wonder about the efficacy of a 0.2% rise in interest rates to 0.1% as a means of countering inflation. I suspect that it's the symbolism that's important, with the Bank of Japan saying that it's prepared to raise rates further, if need be.

This Bloomberg clip looks at Japan exiting negative interest rates, and the implications of this for the Japanese economy. It provides an excellent overview of how the end of the Japanese economic miracle led to decades of deflation, and decades of quantitative easing and negative interest rates.

However, what does the decision to adopt positive interest rates have for the wider Japanese economy. It's an excellent piece of economic history and gives and insight into why deflation is so problematic, and difficult to overcome.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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