0738 GMT - Japan's nominal neutral rate likely lies at 1.75%, higher than the previously estimated 1.5%, given persistent yen weakness has pushed up inflation expectations, says Oxford Economics economist Shigeto Nagai. The rate will then likely decline gradually toward 1.5% in 2028 as inflation expectations edge down alongside the stabilization of the yen, he says. His new projection falls close to the midpoint of the Bank of Japan's estimated range for the neutral rate. "If the FX markets continue to demand faster rate hikes, then the BOJ would face a serious dilemma regarding whether it can risk excessive tightening to contain yen weakening pressures," he says.
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