Why Japan’s economy remains a warning to others

FOR most of this century, it has looked as if the world’s economy was turning Japanese, with low growth, below-target inflation and rock-bottom interest rates. Today, the question is how much Japan will come to look like the rest of the world.

On Tuesday (Mar 19), the Bank of Japan (BOJ) raised interest rates for the first time since 2007, after inflation seemed at last to have become entrenched. Interest on balances held at the bank, previously set at minus 0.1 per cent, will now be 0.1 per cent.

The central bank, under its relatively new governor, Ueda Kazuo, also scrapped its policy of yield-curve control, which capped long-term bond yields at 1 per cent. Having kept monetary policy ultra-loose for years, Japan has now begun to follow the course set by other economies since widespread inflation took hold.