TechFlow, December 5 — Vanguard, the multi-trillion-dollar asset management giant, has warned that the market is severely underestimating Japan's neutral interest rate. Hallem, the firm's global head of interest rates, said the Bank of Japan will need higher rates than currently anticipated by the market to effectively curb inflation, and expects further rate hikes at the December 19 meeting. Japan's current policy rate stands at 0.5%, while the estimated neutral rate ranges between 1% and 2.5%. Vanguard advises investors to underweight Japanese short-term government bonds, viewing an underweight position in the short-to-medium end of the yield curve as the right strategy to avoid risk.
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