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[Bank of Japan Signals Strongest Rate Hike Yet Market Responds with Yen Plunge] ⑴ The Bank of Japan (BOJ) kept its policy rate unchanged at 0.5% as expected, but Kazuo Ueda clearly signaled a strong possibility of a December rate hike. ⑵ Board members Hajime Takada and Naoki Tamura again proposed a rate hike to 0.75%, continuing the policy divergence from September. ⑶ Ueda emphasized that "initial wage growth momentum" is key to determining the timing of a rate hike, stating there is no need to wait for the final outcome of the spring elections. ⑷ The BOJ hopes to obtain "more data" to confirm whether companies can maintain wage increases under pressure from Trump's tariffs. ⑸ Despite the hawkish signal, the yen fell to a new low since February at 153.56, and hit a record low of 178.39 against the euro. ⑹ Market reaction indicates investors expect a more aggressive stance, especially given the US Treasury Secretary's urging for a faster pace of rate hikes. ⑺ Analysts pointed out that the market may be more focused on Ueda's denial that the BOJ is lagging behind the inflation curve, diminishing the sense of urgency. (8) The Japanese economy has so far withstood the impact of high US tariffs, with corporate profits and capital expenditure plans remaining resilient. (9) Inflation has exceeded the 2% target for three consecutive years, with food prices continuing to push up the overall price level. (10) The political environment poses new challenges; the new prime minister is known for advocating loose monetary policy, but most economists still predict that interest rates will be raised to 0.75% by the end of March next year. (11) Ueda emphasized that political factors will not prevent necessary interest rate hikes, and the budget preparation period will not be a policy obstacle. (12) Critics argue that the central bank's slow pace of interest rate hikes exacerbates the weakness of the yen, thereby pushing up import costs and inflationary pressures.