Staff estimates suggest BOJ can hike rates to around 1
No consensus within BOJ on Japan39;s neutral rate estimate
Pessimists see neutral rate lower than staff estimates suggest
Outcome of debate likely to sway future rate hike timing, pace

TOKYO, Dec 18 Reuters As the guessing game over the timing of Japan39;s next interest rate hike heats up, another debate is brewing within the central bank over just how much higher rates can go, a question that could be discussed at this week39;s policy meeting.

While markets expect the Bank of Japan to hold off on raising rates on Thursday, Governor Kazuo Ueda is likely to elaborate on the bank39;s thinking over the future ratehike path.

BOJ staff estimates have shown the bank sees scope to hike shortterm rates at least to around 1 without cooling growth, though some in the bank point to recent lacklustre consumption as a sign the level could be lower.

The outcome of the debate will be crucial in setting the pace of future interest rate hikes, as the BOJ eyes pushing up its policy rate to levels near neutral by around early 2027.

Most analysts expect the BOJ to raise shortterm rates from the current 0.25 sometime by March, which will be an initial step towards hiking to levels deemed neutral to the economy.

Former BOJ board member Takahide Kiuchi expects the bank to slow the pace of rate hikes once it lifts them to 0.5, as further increases will bring borrowing costs closer to neutral.

The BOJ probably believes Japan39;s…