The Bank of Japan (BOJ) policy rate is the short-term interest rate target set by the BOJ's Policy Board. Japan maintained negative interest rates (-0.1%) from 2016 until March 2024, when the BOJ raised rates for the first time in 17 years.

Why It Matters

The BOJ's rate decisions have profound global implications. Japan has been the world's biggest creditor nation, and its near-zero rates made the yen the primary funding currency for global carry trades—borrowing cheaply in yen to invest in higher-yielding assets elsewhere.

Yield Curve Control (YCC)

From 2016 to 2024, the BOJ also controlled the 10-year JGB yield through its Yield Curve Control policy, effectively capping long-term interest rates. The gradual dismantling of YCC has been a major theme in global fixed income markets.

Market Impact

BOJ rate hikes strengthen the yen sharply, as unwinding carry trades amplify the move. This can trigger volatility across global equity and bond markets. Continued accommodation supports a weak yen and carry trade flows.