According to sources, the Bank of Japan will commit to further interest rate hikes at its policy meeting next week

According to three sources, the Bank of Japan is likely to maintain its commitment to continue raising interest rates next week, but will stress that the pace of further rate hikes will depend on how the economy responds to each rate hike. Bank of Japan Governor Kazuo Ueda has largely announced a December rate hike ahead of schedule, and the market has almost fully digested the possibility of a December rate hike from 0.5% to 0.75%. The focus of the market has turned to the extent to which the Bank of Japan can raise interest rates to neutral levels. While the central bank may update its estimate of the policy rate from what is considered neutral internally, it will not use this estimate as its main communication tool for the path of future rate hikes due to the difficulty in making precise predictions, the sources said. Instead, the BoJ will explain that its decision to raise rates in the future will be based on considerations of how past rate rises have affected bank lending, corporate funding conditions and other economic activity, the sources said. "Real interest rates in Japan are very low, which allows the BoJ to continue raising rates in several stages," one of the sources said, while two others shared the same view. (Jin Ten)