The Bank of Japan is expected to start considering the removal of negative interest rates at the monetary policy meeting taking place on March 18th and 19th. This marks a shift from the substantial monetary easing measure of negative interest rates, in a bid to achieve the target of stability in prices and wages.

The Bank of Japan has traditionally set a 2% price stability target, and has introduced substantial monetary easing measures when this target could not be met. One such measure is negative interest rates, which make interbank funding easier and aim to stimulate economic activity.

However, the current economic conditions are beginning to change. For instance, wage increase rates have reached a level not seen in 33 years in the initial count of the Spring Offensive, as announced by RENGO, showing a trend of wage increases. In response to this situation, there was a need for the Bank of Japan to seek a new direction for monetary policy.

The leading candidate in this quest is the phasing out of negative interest rates. If negative interest rates are abolished, it would lead to an increase in bank interest rates and return to a world with interest rates. There are also proposals for a new short-term interest rate target of 0-0.1%.

After the monetary policy meeting concludes, BOJ Governor Kazuhiko Ueda will hold a press conference to explain the details of the decision. This press conference will be live-streamed on the BOJ’s official YouTube channel.

These developments will likely mark a step towards the normalization of Japan’s monetary policy.