JP Morgan AM: Bank of Japan exits negative interest rates
JP Morgan AM: Bank of Japan exits negative interest rates
Last week the Bank of Japan (BoJ) delivered its first rate hike in 17 years, ending its negative interest rate and yield curve control policies. With these moves having been long expected by markets, they were digested smoothly with limited moves in both the yen and Japanese 10-year government bond yields.
While the recent Shunto wage negotiations showed strong wage gains, the BoJ’s messaging accompanying the move was relatively dovish. Governor Ueda did hint at further limited normalisation to come, but cooling inflation has reduced the likelihood of a period of rapid policy tightening. This gradual approach will be welcomed by Japanese equity investors, although we remain vigilant to the potential for yen appreciation given the typically negative correlation between the currency and the equity market.
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