Bank of Japan says rates remain far from neutral as markets turn to December
Japan's core consumer prices rose 2.1 per cent year on year in September, in line with forecasts.
Published
The Bank of Japan says interest rates are still far from neutral. Neutral is the rate at which monetary policy neither slows nor speeds up the economy.
In August, the rise was 1.7 per cent.
The "far from neutral" wording has been in use for weeks. It grew firmer after hawkish remarks by Koeda on 14 October, which signalled readiness to tighten policy. Until then, the open question for markets had been whether the bank would pause and reassess or keep raising rates.
For markets, a fixed date now matters more than a general outlook. A December rate hike looks more like the base case than one option among several. The main channels are the yen-funded carry trade, in which investors borrow in yen to buy higher-yielding assets abroad, and Japanese government bond yields. Those yields have stayed near multi-decade highs reached in late September, even as speculation grew that the bank would hold rates steady.
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