BOJ Grapples with Neutral Rate Challenges as Japan’s Real Policy Interest Rate Hits Global Low
Bank of Japan board members underscored the complexities in achieving a neutral policy rate during a pivotal two-day meeting. One member noted Japan's real policy interest rate now stands as the world's lowest, prompting urgent discussions about monetary policy adjustments to counter currency-driven price effects.
Governor Kazuo Ueda acknowledged the difficulty in pinpointing the neutral rate, with BOJ research suggesting it may lie between 1% and 2.5%. The wide range reflects fundamental uncertainties in Japan's post-zero-interest-rate policy landscape.
Several board members proposed solutions to address the neutral rate conundrum, though specifics remain undisclosed. The deliberations highlight the BOJ's delicate balancing act as it navigates between stimulating growth and preventing economic overheating.
