Former Bank of Japan Gov. Haruhiko Kuroda has signaled that the central bank has a lot of room to raise borrowing costs in its policy normalization process by offering a rough idea of the nation’s neutral interest rate.
"A nominal neutral rate, which the Bank of Japan is trying to gradually approach, could be less than 2%,” Kuroda told the Bund Summit in Shanghai via video link Friday. "A short-term nominal rate may be less than 2%, maybe around 1.5% or maybe less than that.”
The neutral policy rate is the level of interest rates considered neither restrictive nor stimulative to economic growth. Economists estimate the BOJ will take its benchmark rate to 1% in the current tightening cycle, according to a Bloomberg survey's median estimate last month.
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