Japan had remained the last economic bloc on the planet with negative interest rates. The Japanese central bank decided this Tuesday to raise the price of money for the first time since 2007, and thus return to positive territory, in the range of 0 to 0.1%.

Analysts describe it as a historic feat, although looking at it in perspective, the country of the rising sun continues to have a more than accommodative monetary policy. In fact, interest rates have been below 1% since 1995. Furthermore, the bank chaired by Kazuo Ueda will continue to buy practically the same amount of public debt as before, so talk of normalization is a bit hasty.

If anything, it marks the end of an extraordinary era of unconventional monetary policy aimed at lifting the Japanese economy out of decades of deflation or low inflation and stagnant activity.

A key reason for the decision was evidence of strong wage growth. The largest federation of unions, Rengo, reported Friday that workers at the largest companies will receive the most substantial wage increase in three decades, more than 5%. Confidence in a return to sustained inflation, supported by a revival in wage growth, has paved the way for ending negative interest rates after eight years.

The goal, after almost three decades of stagnation, is to create a virtuous circle, “in which higher prices translate into higher wages and then higher wages translate into higher prices, in a sustainable way,” as stated. as the Japanese bank Nomura explains in a note.

Currently, Japan’s inflation rate is 2.1%, down from 4.4% in January 2023. “We have returned to normal monetary policy focused on short-term interest rates, as is with other central banks,” said the governor, Kazuo Ueda, in a press conference after the decision. “If inflation rises a little more, that could lead to an increase in short-term rates,” he said, without providing further details on the likely pace and timing of further rate hikes.

Meanwhile, the Japanese stock market exceeded 40,000 points: the Nikkei reached its highest level in 34 years. Welcome normality.