Japanese Bankers Association Chairman Kato Katsuhiko (加藤勝彦) said the BOJ is highly likely to continue raising rates toward the neutral rate and lift the policy rate from its accommodative level.
Japanese Bankers Association Chairman Kato Katsuhiko (加藤勝彦) said at a regular press conference that the policy rate remains accommodative. He indicated that the BOJ is expected to consider further rate hikes after its current meeting as it moves the policy rate toward the neutral rate.
According to multiple people familiar with the matter, the BOJ is highly likely to raise the policy rate by 0.25 percentage point to around 1.25% at its monetary policy meeting ending on the 18th. The BOJ may shift away from its previous cautious approach of keeping the pace of rate hikes restrained.
The BOJ’s neutral rate is estimated to be in the 1.1%–2.5% range, putting the 1.25% policy rate above the lower end of the range. Kato Katsuhiko (加藤勝彦) said the BOJ intends to raise rates gradually while carefully assessing the economy’s and prices’ responses.
Long-term interest rates are currently trading in the 3% range, reflecting the view that rising rates are accompanied by economic growth driven by a positive cycle of prices and wages.
Continued rate increases could affect the performance of companies with heavy borrowing, while banks indicated that they intend to enhance their support for small and midsize companies and their business revitalization capabilities. There were also concerns that rising long-term interest rates could increase valuation losses and impairment losses on government bonds.