Financial News: The Bank of Japan may continue to signal interest rate hikes, with policy path anchored to economic feedback
According to three informed sources, the Bank of Japan is expected to maintain its commitment to raising interest rates at next week's meeting, while emphasizing that the pace of future rate hikes will heavily depend on the actual feedback from the economy regarding previous rate hike measures.
Bank of Japan Governor Kazuo Ueda has previously sent clear signals that a rate hike in December has become market consensus, and investors have largely digested expectations for the policy rate to be raised from 0.5% to 0.75%. The current market focus has shifted to the pace and magnitude of the Bank of Japan's rate progression towards neutral levels.
Sources indicate that although the Bank of Japan may internally raise its assessment of the neutral interest rate range, it will not use this internal assessment as a core communication basis for future interest rate hike paths, given the difficulty in accurately measuring this value.
Instead, the Bank of Japan will clearly state that future rate hike decisions will be based on the transmission effects of previous rate hikes on bank credit, corporate financing conditions, and overall economic activity. One source indicated that Japan's current real interest rates remain at low levels, providing operational space for the central bank to gradually implement rate hikes, a viewpoint also supported by two other sources.
