look news india
Tokyo: Next week, the central bank in Japan, the world's fourth-largest economy, will begin historic preparations to raise interest rates, abandoning years of negative interest rate lending policy. Japan has been in deflation (falling prices, lack of economic activity despite loose monetary policy, or consumers refraining from shopping) for the past decade, with interest rates below zero. Now there are indications that companies will give more than five percent salary increase to employees in 2024, in such a situation increase in interest rates will be considered.
Japan has had negative interest rates since 2016 and if the Bank of Japan raises interest rates, it could be the first increase since 2007. Domestic consumer consumption in Japan has been quite weak due to its large population of senior citizens and export-oriented economy. Therefore, the government and the Bank of Japan adopted a strategy of keeping the inflation rate at two percent and bond yields around zero to 0.1 percent. This situation has persisted in Japan for the last decade.
In addition, the Bank of Japan was also buying government debt and exchange traded funds that invested in the stock market. Such a situation has arisen that if the interest rate increases, it may have a partial impact on other countries of the world.
The Bank of Japan holds US$8.7 trillion in Japanese government bonds. If the Bank of Japan increases interest rates, it could have the biggest impact. Similarly, Japanese banks and investors also have bonds worth US $ 2.2 trillion of global countries. There is also a possibility that if domestic bonds get higher interest then they will sell foreign bonds and buy domestic bonds. However, for this, how much and for how long the interest rate increases is important. The world's largest carmaker Toyota Motors on Wednesday announced the biggest salary hike for its employees in the last 25 years. Japan's economic growth stood at 0.3 percent in the December quarter and consumer purchasing rose 0.2 percent. But the Bank of Japan believes that consumers will definitely buy into the market if employee wage increases are in line with union demands. Other major companies are also expected to give an average wage increase of 5 to 5.8 percent at the end of talks with labor unions on Friday. The Bank of Japan is likely to take a decision on wage hike based on these data.
The first meeting of the Bank of Japan is on March 18 and 20 and the next meeting will be held in April. It is possible that in the first phase the interest rate may increase by 0.10 percent, which will not have any major impact. Apart from this, market analysts believe that if the interest rates are not increased by one percent and the yield of 10-year bonds is not increased by one percent, then the effect of the current policy of stopping the purchase of real estate and ETFs can definitely be seen. On the global market or the Japanese stock exchange.