Developments in the Natural Rate of Interest and the Assessment of the Degree of Monetary Accommodation

Monetary Affairs Department
Additional contact information
Monetary Affairs Department: Bank of Japan

No 26-E-4, Bank of Japan Review Series from Bank of Japan

Abstract: The natural rate of interest is defined as the level of the real interest rate that is neutral to economic activity and prices, and it is an important concept in the conduct of monetary policy. Following the recent revision of the GDP benchmark, the Bank of Japan has re-estimated the natural rate of interest using the latest data. As before, the estimates display considerable dispersion. Given such uncertainty in the estimation, when assessing the degree of monetary accommodation, the Bank -- similarly to the approach taken by central banks in the United States and Europe -- needs to make a comprehensive judgment. This involves not only looking at the relationship between the real interest rate and the natural rate of interest but also carefully examining economic activity, prices, and financial developments. In doing so, it is critical to examine a wide range of indicators related to financial conditions, which can be considered to serve as a transmission channel of monetary policy to the real economy. These include funding costs, the availability of funds, asset prices, and funding volumes.

Date: 2026-03-27
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.boj.or.jp/en/research/wps_rev/rev_2026/data/rev26e04.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boj:bojrev:rev26e04

Access Statistics for this paper

More papers in Bank of Japan Review Series from Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Bank of Japan ().