Japan's Central Bank Ends Negative Interest Rate After Nearly 2 Decades

In what is seen as a landmark move, Japan's central bank, the Tokyo-headquartered Bank Of Japan, has lifted the lid on its interest rates. The central bank of the fourth largest economy of the world, raised its interest rate on Tuesday for the first time in nearly two decades.

The Bank of Japan increased its short-term rate to a range of 0 to 0.1 per cent from the previous minus 0.1 per cent at a recent policy meeting.

This marks the end to the long standing monetary policy of negative interest rate to foster economic growth. The specific policy of maintaining the interest rate in the range of 0 per cent to -0.1 per cent started in February 2007. This development, therefore ends the 17 year old protocol.

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This move was widely anticipated and signifies a departure from the 'ultra-lax' monetary policy. This also comes weeks after the Japanese economy along with many other major economies observed a coherent slump in their fortunes.

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Japan lost its position as the third largest economy in the world to Germany, which itself has been lagging behind many of its European counterparts.

The inflation in the land of the rising sun is reportedly about to hit its target rate of 2 per cent in recent months.

The markets however, appear to have exhibited a tepid response, as on Tuesday, a day after the interest rate change Japan's Nikkei 225 index lost 0.36 per cent to reach 39,596.23, at the opening of the day's trade.

Meanwhile, the Japanese Yen, which is known for being historically low for competitive reasons stands at 149.75 against the US Dollar, compared to 148.96 on 17 March.