BoJ is bucking the global trend of policy easing and hiked rates more aggressively than we had anticipated in July. This reflects its growing conviction that reflation is now firmly entrenched.

Core inflation above the BoJ’s target for 23 straight months.

Firms prepared to grant “ongoing” and “sizable” wage rises.

Situation quite different from the 1990s “lost decade” when wages failed to grow amid persistent deflation.

BoJ’s goal of a virtuous wage-price cycle.

BoJ’s confidence that it can continue to raise rates towards neutral settings.

A more hawkish BoJ could continue to have global ramifications.