Bank of Japan Gov. Kazuo Ueda used diplomacy and nodded to the dangers of inflation and a weak yen to sell his plan for a December rate hike to Prime Minister Sanae Takaichi, who only last year called rate hikes ¡°stupid.¡±
The pitch worked ¡ª both markets and Japan¡¯s new government got the message that a quarter point rate hike to 0.75% later this month was a near certainty, allaying worries the BOJ might succumb to political pressure to not tighten policy.
However, what is less clear is how the BOJ plans to communicate the longer-term rate hike path ¡ª a more challenging task given a lack of consensus on where Japan¡¯s neutral rate of interest lies.
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