BOJ Ends Negative Rates and Retires Yield Cap
What Happened
On March 19 the Bank of Japan ended its negative-rate policy, setting the overnight rate at 0–0.1%, and dropped explicit yield-curve control while pledging to keep buying bonds as needed. It also ended ETF purchases, marking a historic shift away from emergency-era easing.
What It Means
After years of deflation fear, rising wages and sticky inflation gave the BOJ cover to normalize. The yen strengthened modestly, JGB yields edged higher, and global duration markets digested one less anchor keeping long rates pinned.
What I Think
Normalization was overdue. The BOJ moved cautiously, keeping flexibility to lean on purchases if yields jump. I expect gradual yen strength as rate differentials narrow, but policy will stay gentler than peers while growth remains fragile.
Market Terms
- Negative-rate exit – BOJ lifting the overnight rate to 0–0.1%.
- YCC retirement – Scrapping the hard cap on JGB yields while keeping flexibility.
- Yen firming drift – Currency strengthening as rate differentials narrow.
- ETF purchase halt – Ending equity-buying support alongside normalization.
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