BoJ: No one knows where the neutral rate is

The Bank of Japan raised its policy rate to 1% amid declining downside risks to the economy. Policy officials noted that neutral rate estimates are too uncertain to guide policy, signaling a continued tightening path.

Key Takeaways

• 1.The Bank of Japan raised the policy rate by 25bp to 1%, with one dissenting vote regarding downside risks to production.
• 2.BoJ Deputy Governor Uchida explicitly downplayed published neutral rate estimates, stating they have too wide a range to be usable for actual policy.
• 3.J.P. Morgan expects an additional BoJ rate hike in October 2026 due to anticipated summer inflationary pressures.

Table of Contents

• BoJ: No one knows where the neutral rate is
• Economic and Policy Research

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