Japan's economy is showing signs of improvement as the country's first interest-rate increase in 17 years marks the end of the world's longest zero interest-rate policy. The move by the Bank of Japan validates a decade of structural change in the country's economy. Despite modest GDP growth, Japan's nominal GDP has outgrown China's for the first time in 46 years. The Bank of Japan now faces the challenge of pulling back from stocks and bonds. However, Japan's stock market rally is expected to continue even with the end of negative interest rates. On the downside, Japan has seen a surge in corporate bankruptcies, reaching a 9-year high as COVID lifelines come to an end. Additionally, the manufacturing sector's business mood has dropped for the first time in a year. Despite these challenges, Japan has managed to avoid a recession thanks to strong capital expenditure, which has boosted the country's Q4 GDP. [79e59495]