Three sources familiar with the Bank of Japan's thoughts revealed that the bank may maintain its promise to continue raising interest rates next week, but they will emphasize that the pace of subsequent interest rate hikes will depend on the economy's response to each rate hike. After central bank governor Kazuo Ueda announced this move almost in advance, the market has almost completely digested the possibility of raising interest rates from 0.5% to 0.75% at the December 18-19 meeting. Market attention has turned to the extent to which the Bank of Japan may raise interest rates before they reach a neutral level that neither stimulates nor cools economic growth. Sources said that although the central bank may update its estimate of the gap between policy interest rates and the neutral level internally, since it is difficult to make accurate predictions, it will not use this estimate as the main communication tool for future interest rate hikes. Instead, sources said that the Bank of Japan will explain that future interest rate hikes will be based on the impact of past interest rate hikes on bank lending, corporate financing environments, and other economic activities. However, sources pointed out that since inflation has exceeded the 2% target for more than three consecutive years, Japan's actual borrowing costs are still in a deep negative range — the Bank of Japan may emphasize this next week to provide a basis for further interest rate hikes.

Three sources familiar with the Bank of Japan's thoughts revealed that the bank may maintain its promise to continue raising interest rates next week, but they will emphasize that the pace of subsequent interest rate hikes will depend on the economy's response to each rate hike. After central bank governor Kazuo Ueda announced this move almost in advance, the market has almost completely digested the possibility of raising interest rates from 0.5% to 0.75% at the December 18-19 meeting. Market attention has turned to the extent to which the Bank of Japan may raise interest rates before they reach a neutral level that neither stimulates nor cools economic growth. Sources said that although the central bank may update its estimate of the gap between policy interest rates and the neutral level internally, since it is difficult to make accurate predictions, it will not use this estimate as the main communication tool for future interest rate hikes. Instead, sources said that the Bank of Japan will explain that future interest rate hikes will be based on the impact of past interest rate hikes on bank lending, corporate financing environments, and other economic activities. However, sources pointed out that since inflation has exceeded the 2% target for more than three consecutive years, Japan's actual borrowing costs are still in a deep negative range — the Bank of Japan may emphasize this next week to provide a basis for further interest rate hikes.