BoJ Governor Kazuo Ueda told lawmakers today that Japan’s neutral interest rate remains highly uncertain, describing it as a concept that can only be estimated within a “quite wide range.” He noted that the central bank is attempting to narrow that range and may disclose updated estimates once confidence improves.
Ueda added that the lack of clarity around the neutral rate means the BoJ must operate without a firm sense of how much tightening is ultimately appropriate. This ambiguity, he said, leaves uncertainty around “how far we should raise interest rates,” even as policymakers consider more conventional policy settings after years of ultra-accommodation. Current BoJ estimates place the nominal neutral rate between 1% and 2.5%.
His comments come days after signaling that the BoJ will weigh the “pros and cons” of a rate hike at the upcoming December meeting, a remark markets interpreted as the strongest indication yet that a move to 0.75% is under consideration.
