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Bank of Japan ends era of negative interest rates

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Bank of Japan ends era of negative interest rates

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The Bank of Japan has ended an era of negative interest rates, raising borrowing costs for the first time since 2007 in a historic shift as the country puts decades of deflation behind it.

Kazuo Ueda, the BoJ governor, brought an end to more than a decade of ultra-loose monetary policy, abandoning a swath of easing measures that were put in place to stimulate Asia’s most advanced economy.

Following a 7-2 majority vote the BoJ said it would guide the overnight interest rate to remain in a range of about zero to 0.1 per cent, making it the last central bank to end the use of negative rates as a monetary policy tool. Its benchmark rate was previously minus 0.1 per cent.

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The BoJ turned to negative interest rates in 2016 as it tried to encourage banks to lend more in order to generate spending and contain the risks of a global economic slowdown.

Tuesday’s policy is likely over time to trigger shifts in global investment flows, as domestic yields become more attractive to Japanese investors, and comes as signs emerge of broader change in the Japanese economy.

Workers at some of Japan’s largest companies have secured their biggest pay rise since 1991, giving Ueda enough confidence that mild inflation will continue — a goal that has been central to the bank’s policies for years.

More companies are also passing on inflation costs to consumers and labour shortages are contributing to higher wages.

Investors have also grown more confident in the economy’s prospects. In February the Nikkei 225 stock index finally surpassed the level reached 34 years ago.

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The yen weakened 0.8 per cent against the US dollar to ¥150.33 after the BoJ’s move. The Nikkei 225 stock index closed 0.7 per cent higher on the day while the broader Topix index closed up 1.1 per cent.

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Despite the return to positive interest rates, BoJ officials do not see the first increase as a signal that more will quickly follow.

Inflation, which was sparked by a rise in imported energy and food prices, is well beyond its peak. Core inflation, which excludes volatile fresh food prices, slowed in January for the third straight month.

“Given the current outlook for economic activity and prices, the bank anticipates that accommodative financial conditions will be maintained for the time being,” the BoJ said.

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On Tuesday the central bank also removed its yield curve controls, another policy put in place in 2016 to reinforce its massive monetary easing measures by capping the yields of 10-year Japanese government bonds.

The BoJ said it would maintain its policy of buying about ¥6tn ($40bn) a month in Japanese government bonds, a pledge that underscores continuing weakness in the economy as household consumption remains sluggish.

But it will discontinue purchases of exchange traded funds and Japanese real estate investment trusts.

As part of the new framework, the BoJ will apply an interest rate of 0.1 per cent to deposits held with the central bank, removing a complicated three-tier system of borrowing costs that was adopted to limit the negative rate policy’s hit to commercial banks’ earnings.

While the end to negative interests rates was widely expected, economists had been divided on how far the BoJ would go in scrapping other measures such as yield curve control and ETF purchases.

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Sayuri Shirai, a former BoJ board member who opposed the introduction of negative interest rates in 2016, said that because economic conditions were not yet in place for additional rate increases, the BoJ appeared to have decided it only had one chance to act.

“We have to give credit to Mr Ueda for his resolve and boldness. Instead of doing it gradually, he just quit everything altogether and that also likely means that this is it,” she said.

Ueda’s decision sparked opposition from two BoJ board members, with one arguing that it should have avoided removing both negative interest rates and yield curve controls until the “virtuous cycle” between wages and prices had become more solid.

Additional reporting by William Sandlund in Hong Kong

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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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The Supreme Court on Monday intervened in New York’s redistricting process, blocking a lower court decision that would likely have flipped a Republican congressional district into a Democratic district.    
  
At issue is the midterm redrawing of New York’s 11th congressional district, including Staten Island and a small part of Brooklyn. The district is currently held by a Republican, but on Jan. 21, a state Supreme Court judge ruled that the current district dilutes the power of Black and Latino voters in violation of the state constitution.  
  
GOP Rep. Nicole Malliotakis, who represents the district, and the Republican co-chair of the state Board of Elections promptly appealed to the U.S. Supreme Court, asking the justices to block the redrawing as an unconstitutional “racial gerrymander.” New York’s congressional election cycle was set to officially begin Feb. 24, the opening day for candidates to seek placement on the ballot.  
  
As in this year’s prior mid-decade redistricting fights — in Texas and California — the Trump administration backed the Republicans.   
 
Voters and the State of New York contended it’s too soon for the Supreme Court to wade into this dispute. New York’s highest state court has not issued a final judgment, so the voters asserted that if the Supreme Court grants relief now “future stay applicants will see little purpose in waiting for state court rulings before coming to this Court” and “be rewarded for such gamesmanship.” The state argues this is an issue for “New York courts, not federal courts” to resolve, and there is sufficient time for the dispute to be resolved on the merits. 
  
The court majority explained the decision to intervene in 101 words, which the three dissenting liberal justices  summarized as “Rules for thee, but not for me.” 
 
The unsigned majority order does not explain the Court’s rationale. It says only how long the stay will last, until the case moves through the New York State appeals courts. If, however, the losing party petitions and the court agrees to hear the challenge, the stay extends until the final opinion is announced. 
 
Dissenting from the decision were Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson. Writing for the three, Sotomayor  said that  if nonfinal decisions of a state trial court can be brought to highest court, “then every decision from any court is now fair game.” More immediately, she noted, “By granting these applications, the Court thrusts itself into the middle of every election-law dispute around the country, even as many States redraw their congressional maps ahead of the 2026 election.” 

Monday’s Supreme Court action deviates from the court’s hands-off pattern in these mid-term redistricting fights this year. In two previous cases — from Texas and California — the court refused to intervene, allowing newly drawn maps to stay in effect.  
  
Requests for Supreme Court intervention on redistricting issues has been a recurring theme this term, a trend that is likely to grow.  Earlier last month  the high court allowed California to use a voter-approved, Democratic-friendly map.  California’s redistricting came in response to a GOP-friendly redistricting plan in Texas that the Supreme Court also permitted to move forward. These redistricting efforts are expected to offset one another.     
   
But the high court itself has yet to rule on a challenge to Louisiana’s voting map, which was drawn by the state legislature after the decennial census in order to create a second majority-Black district.  Since the drawing of that second majority-black district, the state has backed away from that map, hoping to return to a plan that provides for only one majority-minority district.    
     
The Supreme Court’s consideration of the Louisiana case has stretched across two terms. The justices failed to resolve the case last term and chose to order a second round of arguments this term adding a new question: Does the state’s intentional creation of a second majority-minority district violate the constitution’s Fourteenth and Fifteenth Amendments’ guarantee of the right to vote and the authority of Congress to enforce that mandate?    
Following the addition of the new question, the state of Louisiana flipped positions to oppose the map it had just drawn and defended in court. Whether the Supreme Court follows suit remains to be seen. But the tone of the October argument suggested that the court’s conservative supermajority is likely to continue undercutting the 1965 Voting Rights Act.   

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Map: Earthquake Shakes Central California

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Map: Earthquake Shakes Central California

Note: Map shows the area with a shake intensity of 3 or greater, which U.S.G.S. defines as “weak,” though the earthquake may be felt outside the areas shown.  All times on the map are Pacific time. The New York Times

A minor earthquake with a preliminary magnitude of 3.5 struck in Central California on Monday, according to the United States Geological Survey.

The temblor happened at 7:17 a.m. Pacific time about 6 miles northwest of Pinnacles, Calif., data from the agency shows.

As seismologists review available data, they may revise the earthquake’s reported magnitude. Additional information collected about the earthquake may also prompt U.S.G.S. scientists to update the shake-severity map.

Source: United States Geological Survey | Notes: Shaking categories are based on the Modified Mercalli Intensity scale. When aftershock data is available, the corresponding maps and charts include earthquakes within 100 miles and seven days of the initial quake. All times above are Pacific time. Shake data is as of Monday, March 2 at 10:20 a.m. Eastern. Aftershocks data is as of Monday, March 2 at 11:18 a.m. Eastern.

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US says Kuwait accidentally shot down 3 American jets

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US says Kuwait accidentally shot down 3 American jets

The U.S. and Israel have been conducting strikes against targets in Iran since Saturday morning, with the aim of toppling Tehran’s clerical regime. Iran has fired back, with retaliatory assaults featuring missiles and drones targeting several Gulf countries and American bases in the Middle East.

“All six aircrew ejected safely, have been safely recovered, and are in stable condition. Kuwait has acknowledged this incident, and we are grateful for the efforts of the Kuwaiti defense forces and their support in this ongoing operation,” Central Command said.

“The cause of the incident is under investigation. Additional information will be released as it becomes available,” it added.

In a separate statement later Monday, Central Command said that American forces had been killed during combat since the strikes began.

“As of 7:30 am ET, March 2, four U.S. service members have been killed in action. The fourth service member, who was seriously wounded during Iran’s initial attacks, eventually succumbed to their injuries,” it said.

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Major combat operations continue and our response effort is ongoing. The identities of the fallen are being withheld until 24 hours after next of kin notification,” Central Command added.

This story has been updated.

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