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Bank of Japan Ends Zero-Rate Policy

7, 14. 2006

The Bank of Japan terminated its zero-interest-rate policy on July 14, lifting its key target rate to 0.25% from zero. The decision was made because the central bank figured out that Japan's economy is steadily expanding and it is unlikely to return to deflation. The situation brought the necessity for the central bank to gradually adjust rates to appropriate level.

The interest rate, the higher limit for the key rate, was also raised from 0.1% to 0.4%. This policy change will cause a rise in rates for ordinary bank accounts. Rates for home mortgage and loans for companies are also expected to rise.

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