Nomura says Bank of Japan governor Ueda has signaled a hawkish tilt and a
December move to a 1.5% policy rate is increasingly likely. BOJ staff estimate
nominal neutral rate at 1.1%–2.5%, but that unobservable range leaves the
terminal rate ambiguous. Inflation has stayed above the 2% target and corporate
capex remains firm, prompting faster policy normalization, yet long-running
deflation and prolonged ultra-low rates make households and firms more sensitive
to higher borrowing costs. Dissent persists inside the BOJ, with some hawks
pressing for a quicker pace. Nomura expects the policy rate may be raised to
about 1.75% by around March before a pause, but the subsequent path is
uncertain.
