BOJ rate hike takes effect—what should we watch next?

The Bank of Japan announced on September 18 that it would raise its policy rate from 1% to 1.25%, a roughly 31-year high. The rate increase itself has now taken effect, but the market’s real “exam questions” are only just beginning: Will there be another hike? If so, how fast will it come?
One of the biggest changes this time is the clearly shorter interval between rate hikes. The BOJ had just raised rates to 1% in June, then hiked again in September, only about three months later. Compared with the relatively slow pace seen during the previous normalization phase, this clearly warrants a fresh market assessment.
At the same time, the BOJ is facing an increasingly complex macroeconomic environment. On the one hand, inflationary pressures still require attention; on the other, Japan’s economy, consumption, and corporate investment cannot withstand excessively rapid tightening. That is precisely why Kazuo Ueda’s subsequent comments on the policy path will matter more than the 25-basis-point hike itself.
One detail is particularly worth noting: the yen did not simply strengthen after the rate hike. Reuters reported that market interpretations of the opposition to the hike from two board members and of the future policy pace instead put pressure on the yen.
This shows that the market has moved from asking “Will rates be raised?” to asking “How much further can they rise?”
Going forward, three variables deserve close attention: the yen exchange rate, Japanese government bond yields, and the policy signals released at the BOJ’s next meeting.
1.25% is merely a numerical change; what could truly reshape global asset pricing is where global capital will flow after Japanese funding costs are repriced.
#日本央行加息至1.25%创31年新高