China has ‘bigger fish to fry’ despite Japan upping interest rates for first time in 17 years

Name: Worries loom over deserted hot spring resort as Japan ends negative interest rate policy
Uploaded: 2024-03-20T09:44:11.000Z
Duration: 3 min 1 s
Description: Worries loom over deserted hot spring resort as Japan ends negative interest rate policy

Bank of Japan ended eight years of negative interest rates on Tuesday, raising the cost of borrowing for the first time in 17 years

But analysts do not expect any direct impact on China, with the People’s Bank of China prioritising the stability of the yuan over rate cuts

3-MIN READ3-MIN

03:01

Worries loom over deserted hot spring resort as Japan ends negative interest rate policy

Amanda LeeandRalph Jennings

Published: 5:44pm, 20 Mar 2024

Japan’s decision to raise the cost of borrowing for the first time in 17 years this week is seen to offer yen assets a boost, but the impact of higher rates on China’s currency and cross-border capital flows might be marginal, according to analysts.

The Bank of Japan (BOJ) on Tuesday met market expectations by ending eight years of negative interest rates in an attempt to stimulate the country’s stagnating economy that has also struggled with deflation.

The move briefly drove up Japanese stocks, with the Nikkei 225 index having gained 19.5 per cent since the start of the year, while the yen is up 5.9 per cent against the US dollar.

But analysts do not expect any direct impact on China as overseas investors are more concerned with the effectiveness of Beijing’s easing measures, which are aimed at supporting sustainable economic growth in the world’s second-largest economy.

China’s domestic economy is struggling to get out of first gear

Harry Murphy Cruise, Moody’s Analytics

China’s economy posted a strong rebound in the first two months of the year, putting it on course for 5 per cent growth in the first quarter, although its prolonged property market slump remains a drag on its overall economic recovery.