BoJ declares a "phase change": Japanese stocks in the era of 2% policy rates

The BoJ raised its policy rate by 0.25ppt to 1.25%, in line with market expectations. At his press conference on September 18, Governor Ueda used the phrase "phase change" to describe the shift in the BoJ's conduct of monetary policy: the previous phase focused on raising underlying inflation to 2%, but now that underlying inflation has generally reached 2%, the bank aims to raise the policy rate to the neutral interest rate. The market viewed this stance as dovish, with modest yen depreciation and a rise in share prices. Three key points: (1) the BoJ shifts focus to raising the policy rate to the neutral rate; (2) the possibility of a 50bp or consecutive rate hikes has not been ruled out;