This time, the market truly believes the Bank of Japan will hike rates in December.

On December 4, Reuters came out directly: three insiders from the Japanese government revealed that the policy rate would most likely jump from 0.5% to 0.75%. Keep in mind, this would be the first real tightening by the BOJ since the move back in January this year.

The shift in sentiment actually started a couple of days earlier. On December 2, BOJ Governor Kazuo Ueda dropped a hint at a meeting: “We need to seriously consider whether to raise rates at this month’s meeting.” As soon as that official tone came out, everyone smelled what was coming—wasn’t this the prelude to action? Sure enough, two days later, sources broke the news: “If the central bank wants to hike, let them—government won’t interfere.” That pretty much cleared up any remaining suspense.

To be blunt, the key reason this is happening is because the government isn’t standing in the way anymore. Previously, the market wondered—wasn’t Prime Minister Sanae Takaichi more conservative? If she was worried a rate hike would derail the economic recovery or mess up the yen’s exchange rate, would she quietly pressure the BOJ? But instead, she’s taken a hands-off approach and handed full control of monetary policy back to the BOJ—the message is clear: “Do as you see fit.”

Kazuo Ueda’s calculations are clear: inflation data has stabilized, the labor market is tight, and the economic fundamentals can handle the impact of a small rate hike. If he kept stalling out of concern for the government, it would only delay the normalization of monetary policy.

The market reacted faster than anyone. As soon as Ueda spoke on Monday, traders priced in an 80% probability of a December rate hike; now with confirmation from government sources, even the remaining 20% doubt has evaporated. But at this point, the question everyone cares about isn’t “Will they hike?”—it’s...