trillion-asset management giant Vanguard Group has issued a warning that the market is seriously underestimating Japan's neutral interest rate level. The group's global head of rates, Harlem, stated that the Bank of Japan needs higher rates than the market expects to effectively curb inflation and expects the central bank to continue raising rates at the December 19 meeting. Currently, Japan's policy rate is 0.5%, while the neutral rate is estimated to be between 1% and 2.5%. Vanguard Group advises investors to underweight Japanese short-term government bonds, believing that underweighting the short end of the yield curve in Japanese bonds is the correct strategy to mitigate risk.