BOJ is said to see hiking cycle likely extending beyond 0.75%

Bank of Japan officials consider it likely that interest rates will rise above 0.75% before their rate hike cycle is over, according to people familiar with the matter, a sign that more increases may be in store after a widely expected move next week.

The officials don’t think the BOJ would be at the so-called neutral rate if borrowing costs are raised to 0.75%, according to the people. Some officials already see that 1% would still be below the neutral rate, they said. The neutral rate is the level at which the central bank’s policies are deemed neither restrictive nor stimulative and is usually the end goal of any cycle of policy moves.

Even if BOJ officials update their estimate of the rate with the latest data, at this point they do not see the range drastically narrowing, according to the people. A narrower range suggests a central bank is closing in on the neutral rate.

Earlier this month Governor Kazuo Ueda fed market speculation over the neutral rate, by saying the bank would like to publish its latest estimate when it can narrow down the range. Still, he warned that it’s a concept that must be viewed with considerable breadth.