Resilient activity data point to rate hike next month

While the BoJ’s measures of underlying inflation were the weakest they’ve been in years in April, the recent surge in input costs due to the Iran War will result in a renewed strengthening. Indeed, with economic activity remaining resilient, the labour market still very tight and BoJ Governor Ueda voicing some concerns about persistent inflationary pressures, we’re becoming more confident in our long-held view that the Bank will ultimately lift rates to 2%.