Insider: Bank of Japan will pledge further rate hikes at next week's policy meeting

On December 12, according to three sources, the Bank of Japan may maintain its commitment to continue raising interest rates next week but will emphasize that the pace of further hikes will depend on how the economy responds to each rate increase. BOJ Governor Haruhiko Kuroda has essentially pre-announced a rate hike in December, and the market has almost fully priced in the possibility of raising the rate from 0.5% to 0.75% in December. The market’s focus has shifted to how much the BOJ can raise interest rates to a neutral level. Sources say that although the central bank may internally update its estimate of the policy rate relative to what is considered a neutral level, due to the difficulty of making precise predictions, it will not use this estimate as the main communication tool for future rate hikes. Instead, the sources state that the BOJ will explain that future rate decisions will be based on how past hikes have affected bank lending, corporate financing conditions, and other economic activities. One source said, “Japan’s real interest rates are very low, which enables the BOJ to continue raising rates in several stages,” and two other sources share the same view. (Jin10)