End of an era as Japan ends negative interest rates; Unilever cutting 7,500 jobs – business live

The Bank of Japan (BoJ) headquarters in central Tokyo today.

LIVE – Updated at 08:10

Rolling coverage of the latest economic and financial news, as Japan ends eight-year stint of negative interest rates.

08:05

Shares in Unilever have risen by almost 5% at the start of trading in London – to the top of the FTSE 100 leaderboard.

Traders may approve of its plans to spin off its ice cream businesses, as well as the acceleration of its growth plan.

Matt Britzman, equity analyst at Hargreaves Lansdown, says:

Action is what shareholders wanted to see from the new team at the top, and that’s what’s been delivered today. Ice Cream always looked like the odd one out when you compare it to other product lines, and performance has struggled of late.

It’s not a huge shock to see this move, but it’s something prior management wasn’t able to deliver. Unilever’s not an overly expensive name at the minute so expect markets to react positively to the news, perhaps more due to the decisive action than anything else.”

Unilever to cut 7,500 jobs under restructuring plan

07:59

Well, this is grim.

Consumer goods giant Unilever has announced plans to cut 7,500 office jobs worldwide, as part of “a major productivity programme”.

Unilever is also spinning off its ice-cream division, which makes Wall’s, Ben & Jerry’s and Magnum.

It says its productivity programme will cut costs by around €800m over the next three years, by cutting complexity and duplication, standardising processes, and driving efficiencies through “operational centres of excellence”

Unilever, which has been under pressure from activist investor Nelson Peltz to shake up its business, says these proposed changes are expected to impact around 7,500 predominantly office-based roles globally.

Hein Schumacher, CEO of Unilever said:

“Under the Growth Action Plan we have committed to do fewer things, better, and with greater impact.

The changes we are announcing today will help us accelerate that plan, focusing our business and our resources on global or scalable brands where we can apply our leading innovation, technology and go-to-market capabilities across complementary operating models.

07:47

Finally, BoJ governor Ueda was coy about when Japan’s central bank might start to wind down its balance sheet.

That balance sheet has swelled due to its bond purchases conducted to keep long-term interest rates low.

Ueda says:

“We will continue to buy roughly the same amount of bonds as in the past. As for the future, we will at some point eye shrinking our balance sheet given we’ve ended our extraordinary monetary easing. But we can’t specify now when that will happen.”

07:35

Kazuo Ueda adds that the BoJ needs to be “mindful” of the risks that inflation is lower, or indeed higher, than it expects.

He says:

“As for downside risks, there are numerous risks surrounding the global economy such as the chance of a negative market shock. There’s also the risk that consumption may not recover as much as expected.

As for upside risk, that would a scenario in which corporate price and wage-setting behavior – which is already changing – makes further dramatic changes. I don’t think the chance of this upside risk materializing is high. But we need to be mindful of such a risk.”

Yen weakens to two-week low

07:33

Perhaps surprisingly, the Japanese yen weakened after the Bank of Japan raised interest rates today.

The yen fell through the 150 point against the US dollar, down from 149, the lowest in two weeks.

Typically, higher interest rates should support a currency. But the BoJ’s move had been well telegaphed, so perhaps it was priced in.

Kyle Rodda, senior financial market analyst at capital.com, explains:

The Bank of Japan lifted rates for the first time in seventeen years while also dialling back its asset purchases and scrapping its yield curve control program. Despite swaps implying that – at best – five points of the 10-point hike was baked into the market, the reaction was limited, if not slightly paradoxical.

The Yen slid, and the Nikkei popped, the latter taking its lead from the former, which arguably has been sold after a build-up in long positioning going into the event. Nevertheless, the meeting was one of the market’s great non-events, although there could still yet be a response when European and US markets come online.

07:23

Kazuo Ueda also signalled that the BoJ could raise interest rates higher, if conditions require it.

The BoJ governor says:

“If our price forecast clearly overshoots or, even if our median forecast is unchanged, we see a clear increase in upside risk to the price outlook, that will likely lead to a policy change.”

07:19

BoJ governor Kazuo Ueda says there is a higher chance that Japan will hit its target of maintaining inflation at 2%.

He tells reporters:

“The likelihood of inflation stably achieving our target has been heightening, including from January through March … As a result, the likelihood reached a certain threshold that resulted in today’s decision.

If the likelihood heightens further and trend inflation accelerates a bit more, that will lead to a further increase in short-term rates.”

Core inflation in Tokyo rose to 2.5% year-on-year in February, data released this month shows. However, core inflation (stripping out energy and food costs) slowed.

BoJ holds press conference

07:12

Bank of Japan governor Kazuo Ueda is briefing reporters in Tokyo now about today’s interest rate decision.

Ueda points out that the move will only raise short-term interest rates by 0.1%, and pledges that the BoJ will “increase bond buying nimbly” if it sees a sharp rise in long-term rates.

Ueda says:

I don’t think deposits or lending rates will rise sharply from today’s decision.

“We reverted to a normal monetary policy targeting short-term interest rates, as with other central banks. We will choose the appropriate level of short-term rates in line with our economic and price outlook. But in doing so, we need to be mindful that there is some distance for inflation expectations to reach 2%. When we focus on this gap, it’s necessary to maintain accommodative monetary conditions even under a normal monetary policy framework.”

(Thanks to Reuters for the translation).

Introduction: Bank of Japan ends era of negative interest rates

06:52

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

It’s the end of an era in central banking today, as Japan halts its policy of operating negative interest rates.

The Bank of Japan has raised borrowing costs for the first time since 2007, choosing to tighten policy after fears of deflation ebbed.

It is raising Japan’s interest rates from -0.1% to between zero and 0.1%, ending an eight-year stint of negative borrowing costs, brought in to stimulate spending and borrowing.

It has also ended its yield curve control (YCC) policy, under which it has been capping long-term interest rates around zero since 2016.

The move makes the BoJ the last central bank to unwind the ultra-loose monetary policy imposed after the financial crisis.

Announcing the move, the BoJ declared that its goal of hitting 2% inflation in a sustainable and stable manner was in sight, adding:

“It [the BoJ] considers that its large-scale monetary easing measures have fulfilled their roles, including the negative interest rate policy and the yield curve control.”

Several major Japanese companies, including Honda, Nippon Steel and ANA Holdings, have recently handed workers their biggest pay rise in over three decades, which has bolstered policymakers’ hopes that prices will rise sustainably.

The BoJ’s timing is slightly ironic, coming as other major central banks ponder how soon they can risk loosening policy. Both the US Federal Reserve and the Bank of England are expected to leave rates on hold this week.

Markets have taken the news in their stride, with Japan’s Nikkei 225 index rising by 0.66% to close at 40,003 points, up 263.16, today.

Stephen Innes, managing partner at SPI Asset Management, says:

As the Bank of Japan (BoJ) made significant policy changes, crossing what can be seen as a Rubicon in its monetary approach, the moves had been extensively communicated to the market beforehand.

Consequently, the adjustments were largely anticipated, and the markets had priced them in almost perfectly.

BoJ governor Kazuo Ueda is giving a press conference now, to outline the decision, so we’ll have more details shortly…

The agenda

10am GMT: ZEW index of eurozone economic sentiment

12.30pm GMT: US housing starts for February

3pm GMT: Chancellor of the exchequer Jeremy Hunt faces questions from the Economic Affairs Committee