Japan’s Bank Takes a Big Leap Forward
After a decade of cheap money—negative rates and all—the Bank of Japan finally pulled the plug on its ultra‑easy policy. It was a quiet fireworks show, but still a huge deal.
The Quiet Exit
Turns out the BOJ had been planning this move for ages. They made the decision by March, sparked by the Rengo wage talks that, for the first time in 30 years, secured a 5%+ raise. Nice. The payout? A 10‑basis‑point increase, ending the global negative‑rate era. The new reference rate? An unsecured overnight call hovering at 0.0%‑0.1% for the time being.
Yield Curve Control—A Long‑Gone Chapter
They also threw the 1% cap on 10‑year Japanese bonds out the window. Instead, they promise to buy long‑dated bonds “as needed,” keeping the markets calm. Will they truly follow through? Only time will tell.
Program Termination
The BOJ ended its ETF and J‑REIT buying. With the Nikkei at record highs, that wasn’t too shocking. But with all these moves in line with expectations, the big question is: is this the start of a tighter tune‑up, or just a sign‑off?
Governor Ueda’s Balanced Take
Ueda gave a mixed message. He said the “accommodative” stance will stay for a while, and future hikes depend on inflation and the 2% target’s sustainability. Some Japanese yen bulls expected a hawkish BOJ this year—turns out, a rapid tightening may be off the table.
The Yen’s Future: A Proxy for U.S. Rates
The yen remains a proxy for U.S. rates. Past big inflation prints have tilted the curve downward, with the Fed’s December 2024 likely nudging up by 25 basis points. For the yen to gain in the long run, we’d either need a sharp U.S. slowdown or a geopolitical show‑stopper that forces a risk‑off turn. Either way, it’s probably short‑lived.
Bottom Line
Negative‑rate policy? Gone. The BOJ’s unprecedented easing? Over. Yet the yen still faces the same challenges it did before the normalisation hit.
