BoJ Getting Closer to Ending NIRP, But What if It Can’t?

(Originally published on January 23, 2024)

On January 23, 2024, the Bank of Japan (BoJ) stated that it is getting closer to raising its short-term policy rate to zero % from negative 0.1%, where it has been since 2016. But for now, the central bank will maintain its highly accommodative monetary policy while seeking further evidence of a virtuous cycle of growth led by wage growth. Governor Kazuo Ueda suggested that the degree of certainty is gradually rising.

But what if the conditions necessary to raise policy rates do not materialize? No one at the press conference asked Governor Ueda how long the central bank could continue its current policy in such a case.

Further, would the BoJ be able to take additional easing measures if necessary, as stated in the BoJ’s Statement of Monetary Policy, without risking further depreciation of the yen?
Let’s hope we never have to find out.

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