Bank of Japan Governor Kazuo Ueda has indicated that the central bank is actively working to narrow its estimate of Japan’s neutral interest rate—the rate at which monetary policy neither stimulates nor restrains the economy. He explained that the Bank of Japan (BOJ) will disclose its findings once the assessment becomes sufficiently precise. Currently, Ueda said policymakers rely on a “fairly wide range,” highlighting ongoing uncertainty about how high interest rates can ultimately rise as the BOJ moves to normalise policy.

Ueda emphasised that monetary conditions remain accommodative despite recent tightening measures, suggesting that further rate increases are possible but not predetermined. He acknowledged significant uncertainty regarding the eventual peak for interest rates, a critical issue for markets observing the BOJ’s gradual exit from its ultra-loose policy stance.

Additionally, Ueda commented on the government’s new economic package, stating it is likely to boost growth. However, its impact on inflation could be mixed, with the potential to exert both upward and downward pressures depending on the specific elements of the programme.

Original Source: Eamonn Sheridan of investinglive.com