TechFlow news, December 12 — According to three sources, the Bank of Japan is likely to maintain its commitment to further rate hikes next week, but will emphasize that the pace of additional increases will depend on how the economy responds to each hike.
BOJ Governor Kazuo Ueda has already largely signaled a December rate hike, and markets have almost fully priced in a move to raise interest rates from 0.5% to 0.75%. Attention has now shifted to how far the BOJ can push rates toward neutral levels. The sources said that while the central bank may internally update its estimate of how far policy rates are from the perceived neutral level, it will not use this estimate as a primary communication tool for its future hiking path due to the difficulty of making precise forecasts.
The sources said instead the BOJ will explain that future rate decisions will be based on assessments of how previous hikes have affected bank lending, corporate financing conditions, and other economic activity. "Real interest rates in Japan are very low, allowing the BOJ to continue raising rates in stages," one source said, a view shared by two others. (Golden Age)
