The Bank of Japan’s policy rate is expected to reach 2% by the end of 2027, according to a new estimate from the OECD.
Assuming inflation remains around 2%, the current policy rate is still near the lower end of a range that would be neutral for the economy, the OECD said in its economic surveys released Wednesday. It added that the BOJ should continue raising interest rates gradually to prevent the economy from overheating.
"We see a pace of normalization should accelerate as the economy’s new equilibrium becomes clearer,” OECD Secretary-General Mathias Cormann told reporters in Tokyo on Wednesday, citing anchored inflation expectations and demand that exceeds supply. He added that he does not believe the BOJ is "critically behind the curve” at this stage.
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