Japan Macro Watch: BoJ hikes, but no strong case for December yet

The BoJ raised its policy rate from 1.0% to 1.25% at its September meeting, as widely expected, bringing rates to their highest level since 1995. With the hike coming only three months after the June move, the pace of normalization has accelerated. The statement was largely unchanged, maintaining that financial conditions remain accommodative despite rates having entered the estimated neutral range. Governor Ueda struck a broadly neutral tone, stating that the phase of monetary policy has shifted from raising inflation to stabilizing inflation around the 2% target, while reiterating the risk of an inflation overshoot, though he suggested consecutive hikes or 50bp moves would likely require a significant inflation overshoot. The meeting did not provide sufficient evidence to decisively bring forward our next hike call from January to December;