[Vanguard Group Warns Japan's Neutral Rate is Underestimated, Recommends Underweighting Short-Term JGBs] Trillion-dollar asset management giant Vanguard Group has warned that the market is significantly underestimating Japan's neutral interest rate level. The group's Global Head of Rates, Haralambos, stated that the Bank of Japan may need a higher interest rate level than the market expects to curb inflation and predicted that the central bank will continue to raise rates at its December 19 meeting. Japan's current policy rate is 0.5%, with the neutral rate estimated to be between 1% and 2.5%. Vanguard Group recommends investors underweight Japanese short-term government bonds, suggesting that underweighting the short end of the yield curve is a risk-avoidance strategy.