Well, honestly, I'm designing the difficulty around Hard mode, with the intention of replicating Touhou Labyrinth's feel in some ways. The first jump in enemy difficulty is meant to jar you a bit and get you to be unafraid to use your skills in battle, as even if the attack commands can actually deal damage in this one, leaving an excess of enemies early in the battle can lead to you suffering some very significant damage, until such time as you've grown stronger and can handle things easier without needing to abuse your best skills. Later on, once things like full-party heals and revival spells are actually available to you, well, the difficulty's definitely going to ramp up again.
Either way, it's not set up to be unfair (yet), but because I'm testing it on Hard, it's occasionally easy to miss the fact that Normal... isn't quite so much easier as I'd like.
Easy is Normal but with 5x the EXP, so... you don't even really need to grind and you'll be overpowered for a given area.
Normal is intended for the feeling of still having challenging bosses, but enemy battles that don't feel too difficult.
Hard is intended to keep you on your toes, with your party possibly being run over if you're not careful (See most of Touhou Labyrinth)
Lunatic is intended to cause RAGE.
And yes, I have been modifying AI routines based on difficulty. Enemies have new attacks on higher difficulties, or are more likely to use their more dangerous ones, on top of having higher stats.