A December hike fits a steady, quarterly pace, which should limit surprises for markets, but Daiwa sees the risks tilted towards earlier moves. That keeps the front end of the JGB curve under upward pressure, with Japan's 10-year yield already at its highest since 1996. The yen is central here. Daiwa says a sharp fall in the yen is one of the few things that could speed the BOJ up, so yen weakness could bring hike expectations forward. For AUD/JPY, the RBA and BOJ are both tightening, which blunts the rate-gap trade that has historically supported the pair. Any upgrade to the BOJ's inflation forecasts in the October Outlook Report would be the first test of the December call.---The BOJ's job is no longer to get inflation up to 2% but to keep it there. Daiwa reads Ueda's "new phase" as quarterly hikes, starting in December, with the risks tilted towards moving sooner.Summary:Daiwa expects the next BOJ hike in December 2026, then another in April 2027, with rates peaking around 2%The BOJ raised its policy rate to 1.25% in September, and Ueda declared a shift in the policy phaseThe goal now is to keep underlying inflation stable at 2% and prevent an overshoot, weighing upside and downside risks equallyHigher oil prices, wage strength, elevated inflation expectations and companies passing on costs are driving the concernUeda did not rule out back-to-back hikes or a 50 bp move, but Daiwa sees quarterly steps as more likelyUpgrades to the BOJ's inflation forecasts are possible in the October Outlook Report if oil stays highThe Bank of Japan is likely to raise interest rates again in December, followed by another hike in April 2027, according to Daiwa Securities economist Kenji Yamamoto. He argues that the central bank's September move marked a genuine turning point in how it runs policy. The BOJ lifted its policy rate to 1.25% this month, and Yamamoto expects it to keep tightening at roughly one hike per quarter towards a peak of around 2%.The key shift, he says, is in the BOJ's objective. At his post-meeting press conference, Governor Kazuo Ueda said the policy phase had changed. With underlying inflation now close to 2%, the task is no longer to lift inflation towards target but to hold it there and prevent an overshoot. Yamamoto notes the message was well telegraphed: it had already appeared in the July Summary of Opinions and in a speech by Deputy Governor Ryozo Himino shortly before the meeting.That change matters because the BOJ will now weigh upside and downside risks to inflation equally. Until recently, upward price pressure was welcome, because it pushed inflation towards 2%. Now the same pressure risks keeping inflation stuck above target, particularly as Japanese companies have become far more willing to pass higher costs on to customers. Ueda gave four reasons for the September hike: a worsening situation in the Middle East, stronger than expected AI-related demand, elevated inflation expectations and firm wage data.Oil is a central concern. Ueda described a second wave of energy-driven price increases arriving before the first had fully worked through to consumer prices. If crude stays high, Yamamoto sees a growing chance that the BOJ raises its core inflation forecasts for this fiscal year and next in its October Outlook Report.Ueda said the next move would basically be a hike, and he did not rule out back-to-back increases or a 50 basis point step if the risk of inflation running well above target grows. Yamamoto nonetheless sees consecutive hikes as unlikely. Financial conditions have already tightened considerably through long-term and super-long bond yields, even as bank lending and asset markets remain accommodative, and the level of the neutral rate is still uncertain.Faster tightening would require a further build-up in inflation risks, or a sharp fall in the yen that drives up import costs. Conversely, if earlier hikes begin to clearly restrict lending and asset markets, the pace would likely slow. Yamamoto sees no need yet to raise his forecast of a 2% peak, but judges that the risks are tilted towards earlier hikes and a slightly higher path. Ueda gave no view on where rates might peak and did not suggest 1.25% was neutral.At the September meeting, the BOJ also tightened a facility that funds climate-related lending. It switched the loans to a floating rate and capped them, so the programme no longer undercuts the effect of rate hikes. It is a small change, but Yamamoto sees it as further evidence that normalisation now reaches beyond the policy rate itself. This article was written by Eamonn Sheridan at investinglive.com.