Speaking at the Diet this Monday, Bank of Japan Governor Kazuo Ueda sent a clear hawkish signal: Japan's core inflation is “very close” to the 2% inflation target set by the central bank, while the current conflict in the Middle East is driving up energy prices, and the tight Japanese labor market combined with the global AI boom driving exports and capital expenditure to jointly drive up domestic prices in Japan. The Bank of Japan has room for further interest rate hikes. This speech comes on the eve of the Bank of Japan's key monetary policy meeting this month. Such strong hawkish signals further convinced the market that the Bank of Japan would raise interest rates again during the year. The market will keep an eye on quarterly growth and inflation forecasts updated at the Bank of Japan meeting at the end of October to determine the window for the next round of interest rate hikes.

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