Financial markets are increasingly expecting the terminal level for the BOJ's policy rate to rise into the 2.5% range. The rate currently stands at around 1.25%, and expectations for further rate hikes are shifting.
Financial markets increasingly expect the terminal level estimated by the BOJ to rise above the current level, with a growing possibility that it will exceed 2.5%. In particular, more market participants expect it to surpass the upper end of the neutral interest rate range.
The BOJ's current policy rate remains at around 1.25%, but market expectations for the terminal rate have been moving higher.
Higher domestic inflationary pressure, driven by persistently high crude oil prices and yen depreciation, is strengthening expectations that the BOJ will proceed with further rate hikes.
The neutral interest rate range is considered to be 1.1% to 2.5%, and expectations of a higher terminal rate are prompting greater focus on the upper end of this range.