Nomura Securities: BOJ December Hike to 1.5% Nearly Certain, Next Year's Path Unclear

According to Jin10, Nomura Securities said a Bank of Japan rate hike to 1.5% in December was nearly certain after Governor Kazuo Ueda sent hawkish signals, but room for further monetary tightening next year remains unclear. The BOJ estimates the nominal neutral rate at 1.1% to 2.5%. Because the rate cannot be observed directly, policymakers have difficulty determining the endpoint for rate hikes. Japanese inflation has remained above the 2% target, while strong business spending has pushed the central bank to accelerate policy normalization. However, the long period of deflation and ultra-low interest rates may make households and businesses more sensitive to higher borrowing costs. BOJ policymakers are divided over the pace of rate hikes, with some hawkish members calling for faster increases. Nomura Securities expects the BOJ to raise rates to 1.75% around March next year and then pause, though the final path remains uncertain.