FirstFT: Japan exits era of negative interest rates

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Good morning. We start today with a moment of history in Japan where the board of the country’s central bank voted to raise interest rates for the first time since 2007.

The Bank of Japan was the only central bank in the world still using negative interest rates but following a 7-2 majority vote by its monetary policy committee, the BoJ decided to end its ultra-loose monetary policy and raise borrowing costs to a range of zero to 0.1 per cent from its previous benchmark rate of minus 0.1 per cent.

The BoJ turned to negative rates in 2016 to encourage banks to lend more and stimulate economic activity. With today’s decision, it is aiming to put decades of deflation behind it as inflation, triggered by rising food and energy prices, takes hold in the economy and companies pass on rising costs to consumers.

Workers at some of Japan’s largest companies have recently secured their biggest pay rises since 1991, giving BoJ governor Kazuo Ueda confidence that mild inflation will continue — a goal that has been central to the bank’s policies for years.

The historic decision was part of a series of measures to unwind years of monetary policy intervention. Here’s how investors reacted.

• Opinion: The BoJ has signed an armistice with unconventional monetary policy, not a peace treaty, argues Robin Harding.

And here’s what I’m keeping tabs on today:

• Federal Reserve: The US central bank begins a two-day meeting to decide interest rates. It is expected to keep borrowing costs at their current 23-year high. The timing of any cut would be tricky, wrote the FT’s editorial board recently.

• Economic data: New US monthly residential construction data and building permits for February are released. Argentina’s government is due to release February trade balance data and Canada releases inflation figures.

• CERAWeek: Chevron chief executive Michael Wirth addresses the energy conference a day after ExxonMobil chief Darren Woods spoke about the tense dispute with its rival in Guyana. Here’s what he said.

• Politics: Donald Trump-favourite Bernie Moreno competes against Matt Dolan and Frank LaRose to be Senate nominee in the battleground state of Ohio. The winner will face incumbent Democrat Sherrod Brown in November. There are also primary contests taking place today in Arizona, Florida, Illinois and Kansas. Follow the FT’s full coverage of the 2024 election by subscribing to the US Election Countdown newsletter here.

Join us online on March 21 to discuss important growth opportunities and barriers for businesses in film, TV, music and gaming, as well as solutions to Wall Street’s concerns over the future of investment within the entertainment industry. Register for free today

Five more top stories

1. Exclusive: Billionaire investor Nelson Peltz plans to vote for Donald Trump, saying his assessment that President Joe Biden’s “mental condition is really scary” outweighed his concern over the January 6 2021 attack on the US Capitol. The founder of $10bn investment firm Trian Partners told the FT that the litany of criminal charges against the former president amounted to a “miscarriage of justice”, helping to make the activist investor a likely Trump voter in November.

• Donald Trump news: Lawyers for the former president told a court in New York yesterday that Trump was unable to secure the bond needed to postpone the enforcement of a $464mn fraud judgment against him and his business empire.

2. Unilever is to split off its ice cream business and cut 7,500 jobs as the consumer goods group steps up efforts to improve its performance. The company said that the ice cream division, home to brands including Wall’s, Magnum and Ben & Jerry’s, would fare better as a standalone business. Separating the ice cream business is the biggest step so far taken by chief executive Hein Schumacher, who joined last year vowing to accelerate growth and improve returns to shareholders.

3. Nvidia has unveiled its latest artificial intelligence chips, which the company claims are far more powerful than its existing market-leading hardware, as it sets its sights on extending its dominance in the growing industry. Chief executive Jensen Huang said Nvidia’s Blackwell graphics processing units would hugely increase the computing power driving large language models. Here’s more on what Huang said.

4. Bill Gates’ TerraPower plans to start building the first of a new generation of nuclear power plants in the US in June, joining a race with Russian and Chinese rivals to develop and export lower-cost reactors. TerraPower’s chief executive said his company would apply for a construction permit from US regulators this month for its Natrium-branded reactor, which is cooled with liquid sodium and could be built for about half the cost of standard water-cooled reactors. Read more from Chris Levesque’s interview with the FT.

5. Deloitte has launched the biggest overhaul of its global operations in a decade as the Big Four firm seeks to cut costs and reduce the organisation’s complexity in the face of an expected market slowdown. Under the plan, Deloitte’s main business units will be cut from five to four in an attempt to reduce costs across the firm. Here’s how the announcement was received inside Deloitte.

The Big Read

Since late July, when US regulators unveiled plans that they say will make banks safer, the issue of bank capital rules has been forced into the mainstream like never before, with adverts opposing the rules popping up in podcasts and television shows. Critics warn of dire consequences for “everyday Americans” if authorities push ahead with what they have apocalyptically termed “Basel Endgame”, while advocates of the new rules, which are stricter than globally agreed standards, say the concerns are overblown.

We’re also reading and listening to . . . 

• ‘Tale of two economies’: The economy of the battleground state of Georgia is booming, but Biden, the president who has overseen this bonanza, is getting little credit.

• Europe’s Morgan Stanley?: A year on from UBS’s rescue of Credit Suisse, the merger’s success is becoming increasingly dependent on the performance of the Swiss bank’s wealth business.

• Artificial intelligence: Too little attention is being paid to how AI could transform the state, writes Stephen Bush. While it might never be cheap enough to replace you at work, it is already changing how you are governed.

Chart of the day

The world’s biggest oil and gas companies are expanding a satellite monitoring campaign to detect methane emissions in emerging economies. The move comes after the detection of 26 large leaks of the planet-warming gas over Kazakhstan, Egypt and Algeria. However, a report published last week by the International Energy Agency found that the US — the largest global producer of oil and gas — was the biggest emitter, closely followed by Russia.

Take a break from the news

Can a cream make your skin happy? Christine d’Ornano, global vice-president of Sisley Paris and co-creator of the new skincare brand Neuraé, thinks so. Neuraé is betting big on the emerging science of “neurocosmetics”, the cosmetic field based on the brain-skin connection and how our emotions affect our skin. “It’s a whole new way of treating the skin,” said d’Ornano. “We are just at the beginning.”

Additional contributions from Grace Ramos and Benjamin Wilhelm