TechFlame reports that Vanguard, the trillion-dollar asset management giant, has issued a warning that the market is severely underestimating Japan's neutral interest rate level. According to Roger Hallam, the group's global head of rates, the Bank of Japan will need higher interest rates than the market expects to effectively curb inflation, and he anticipates that the central bank will continue to raise rates at its December 19 meeting. Currently, Japan's policy rate stands at 0.5%, while the neutral rate is estimated to be between 1% and 2.5%. Vanguard advises investors to underweight short-term Japanese government bonds, believing that reducing exposure to Japanese bonds at the short end of the yield curve is the right strategy to mitigate risks.