BoJ’s optimism will be put to the test

The recent pick-up in crude oil prices vindicates the Bank of Japan’s concerns about upside risks to inflation. To be sure, the renewed closure of the Strait of Hormuz could prompt the Bank to flag renewed downside risks to economic activity at its meeting in a couple of weeks. But given that crude oil prices aren’t any higher than they were at the Bank’s June meeting, we think the Board will stick to the more optimistic tone adopted then.