BoJ Mouthpiece Confirms Historic End Of Negative Rates Next Week, 1st Hike In 17 Years

For the past few weeks we have diligently reported on the fact that The Bank of Japan (BoJ) has been foaming the runway for a dramatic shift in its monetary policy, and today we get the final confirmation from notorious establishment ‘mouthpiece’ Nikkei news, stating that the central bank is expected to end its negative interest rates when its policy board meets on Monday and Tuesday.

Nikkei has reportedly learned, that the BoJ will unveil its first rate hike since February 2007 in a turning point for the BOJ’s long-running monetary easing policy.

As we have highlighted recently, the central bank sees a chance to normalize its monetary policy now that inflation appears set to remain at 2% or higher as big corporations and their labor unions agreed on substantial wage hikes this year.

• The BOJ “Has Made Up Its Mind To Hike Rates” After Union Wage Negotations Lead To Surge In Pay

• Nikkei Plunges As Yen Soars Ahead Of BOJ Policy Change

• Yen Soars To 6-Week High On BoJ Hike-Hopes & ‘Bad’ US Jobs

• USDJPY Plunges As Soaring Japanese Wage Growth Sparks Surge in BoJ Rate-Hike Odds

Nikkei details that the BOJ began coordinating both within and outside the bank Friday on ending its negative interest rate policy, which was adopted in February 2016.

The leading plan is to raise the policy rate, currently at negative 0.1%, by more than 0.1 point to guide short-term interest to the 0%-0.1% range.

The Nikkei news comes after the Japanese OIS market is closed but it went out pricing in around a 60% chancxe of a BoJ hike…

Source: Bloomberg

Speaking at Parliament on Tuesday, Ueda said he is closely monitoring the virtuous cycle of wage hikes and inflation, hinting that the bank is in the final stages of ascertaining whether to exit negative rates.

This year’s wage hikes “are of a level that even reflationists who are cautious about modifying monetary policy would accept a change in policy,” according to a BOJ source.

Government officials are increasingly receptive to a March exit from negative rates. A senior Finance Ministry official said that an exit in March would be preferable, as there is no need to wait until April.

Notably, amid this constant stream of front-running and warning, Yen has been falling (contrary to what would be expected from a hawkish shift)…

Source: Bloomberg

Is this yen-selling may be the calm before the face-ripping ‘buy the news’ strength? Or is it a sign of investor angst over the impact on a euphoric stock market of positive interest rates and a central bank that is no longer (even be it marginally) at your back?

Premium subs can read the full details behind The BoJ’s decision (and its implications) here…