While reports have made a December BOJ rate hike appear almost certain, uncertainty remains over the neutral rate and the course of future policy. The impact of rising inflation and borrowing costs is drawing attention.
According to reports from Tokyo, the Bank of Japan is widely expected to raise interest rates in December. However, Governor Ueda (植田) has not provided a clear outlook on how far rates will be raised as they approach the neutral level. For Japan's economy, which has maintained accommodative monetary policy for many years, the shift toward monetary tightening presents a new challenge.
As inflationary pressures intensify, the BOJ is being called on to balance stronger measures to address inflation with efforts to manage the borrowing costs of households and businesses. The estimated range for the neutral rate is 1.1% to 2.5%, but no official figure has been released, and estimates vary by model. This is adding uncertainty to future interest-rate decisions.
The BOJ's Governor's Council includes multiple views among its members. Tamura Naoki (田村直樹) advocated gradual and consistent rate hikes, while Takada Hajime (高田創) argued for faster increases, but this was not approved at the latest meeting. As a cautious member, Koeda Junko (小枝順子) only indicated that the neutral rate could be significantly above 1%.
Government statistics show that Japan's economy grew at an annualized rate of 1.4% in the second quarter, while September core inflation reached 2.1%, exceeding the BOJ's target. The impact of fuel subsidies offset declines in prices, contributing to higher inflation risks.