BOJ board member 増 noted that real interest rates on 1-year and 2-year instruments remain negative even after taking into account the impact of recent rate increases. The comments suggested that negative real interest rates should be eliminated soon while the economy is no longer in deflation.
BOJ board member 増 noted that real interest rates remain negative despite recent rate increases. The rates in question are those on 1-year and 2-year instruments, and the board member explained that real interest rates have remained negative even though the economy is no longer in deflation.
Speaking at the Fukui Financial and Economic Meeting, the board member suggested that an early rate hike was necessary and said the timing and pace of policy adjustments would be considered while reviewing the outlook in the Outlook for Economic Activity and Prices report.
The market is said to have almost fully priced in the possibility that the BOJ will decide to raise rates at its 17–18 monetary policy meeting. The board member indicated a policy of seeking to complete monetary normalization by adjusting the degree of monetary accommodation.
The BOJ's estimated range for the neutral interest rate is 1.1%–2.5%, assuming a 2% inflation rate. The comments said a framework was needed to implement nimble measures while taking the current accommodative financial conditions into account.