Bank of Japan Policy Board member Masu Ichiro (増一行) said that underlying inflation is not currently seen rising substantially above 2%. He described the current situation, in which the policy rate is below the lower end of the estimated range for the neutral interest rate, as unnatural, and indicated that discussions should continue at next week's meeting.
At a press conference, Bank of Japan Policy Board member Masu Ichiro (増一行) said that underlying inflation is not currently seen rising substantially above 2%, indicating that conditions do not warrant a large 0.5% rate hike.
Based on the Bank of Japan's estimates of the natural rate of interest, the neutral interest rate is estimated to be in a range of 1.1% to 2.5%, and the current policy rate is below the lower end of that range. He also acknowledged that the precise level of the neutral interest rate is unknown.
He said it was unclear how accurate the estimated level of the neutral interest rate was, and added that whether raising the policy rate to 1.25% would still be accommodative would be assessed going forward. He did not express a view on whether to raise rates at the September meeting, indicating that discussions would continue.
In terms of the market reaction, government bond futures regained stability at one point, while some market participants took a cautious view of expectations for an acceleration in the pace of rate hikes and an increase in the terminal rate.