A knife-edge RBNZ decision, firming BOJ rate hike signals, and stubborn core inflation kept markets busy across a session heavy with central bank newsflow.
The session's centrepiece was the Reserve Bank of New Zealand's Monetary Policy Statement, which delivered a hold by the narrowest possible margin. Governor Anna Breman's casting vote resolved a 3-3 committee split in favour of keeping the Official Cash Rate (OCR) at 2.25%, but the hawkish message embedded in the updated projections — and unanimous agreement on the need for hikes this year — left the New Zealand dollar higher. The OCR track was revised sharply upward, with a terminal rate of 3.28% now projected for June 2029 and inflation forecast to peak at 4.3% in the September quarter.
Australia CPI: Softer Headline, Firmer Core
Australian April CPI printed below consensus at 4.2% annually against an expected 4.4% and a prior reading of 4.6%, but the headline softness owed almost entirely to the temporary fuel excise reduction. The trimmed mean measure of core inflation ticked up to 3.4% annually — a 22-month high — keeping the RBA's June decision genuinely open. The Australian dollar fell on the data. NAB joined CBA and Westpac in flagging firm underlying inflation for April ahead of the release, while analysts had been split on the outcome as conflict-related costs filtered through.
BOJ Laying Groundwork for Rate Hike
Governor Kazuo Ueda's remarks at the Bank of Japan's IMES Conference, alongside subsequent parliamentary testimony from BOJ Monetary Affairs Director-General Akio Okuno, together pointed toward a potential rate increase at the June 16 meeting. Ueda framed the current Middle East conflict as Japan's fifth oil shock and argued that initial conditions — including shifting inflation expectations and a tighter labour market — make this episode more consequential than previous ones. He opened the two-day IMES conference with a warning that temporary oil shocks can become persistent. Okuno confirmed that financial conditions remain loose and real rates negative. Japan's April Services PPI (Corporate Services Price Index) came in at 3.0% year-on-year, below the forecast of 3.3% and the prior reading of 3.1%. The Nikkei rose 1.3% to a fresh record above 66,000, driven by tech stocks and the softer-than-expected services inflation print.
Geopolitics: Cautious Optimism on Hormuz
Oil drifted lower as hopes for a US-Iran agreement remained intact despite recent US self-defence strikes in southern Iran. An Al Jazeera chief tweeted that a deal had been agreed but not yet signed, though no official confirmation followed. Uncertainty remained elevated.
Equities: Mixed Across the Region
Nikkei +1.3%, reaching a fresh record above 66,000, driven by tech and a softer-than-expected Services PPI.
KOSPI +4.7%, hitting a new all-time high and outperforming across the session.
Hang Seng -0.8% and Shanghai Composite -0.9%, with Chinese markets lagging amid comments from USTR Greer that US tariffs on Chinese goods will likely always remain higher than for other countries. Xiaomi also reported a 43% drop in adjusted Q1 net profit.
Other Notable Stories
Goldman Sachs lifted its year-end 2026 S&P 500 target to 8,000 from 7,600. China's industrial profits rose at their fastest pace in more than two years, lifted by AI-related demand and the oil price surge; year-to-date (January–April) industrial profits were up 18.2% year-on-year, compared with a prior reading of +15.5%. Samsung's largest union approved a compensation deal averaging approximately $340,000 per chip worker, averting a strike that had threatened global supply chain disruption. Elon Musk has discussed merging SpaceX and Tesla with colleagues as SpaceX prepares its Nasdaq debut at a $1.25 trillion valuation, with both companies rapidly scaling AI capital expenditure. The PBOC set the USD/CNY mid-point at 6.8291, compared with an estimate of 6.7883. Citadel Securities warned that the Federal Reserve risks falling behind the curve as the inflation threat grows, while TD Securities maintained a bearish dollar view despite stronger US data and the ongoing Iran conflict. The Bank of France governor also vowed that the ECB will do whatever it takes to contain inflation.
Why it matters
The RBNZ's 3-3 committee split — resolved only by the governor's casting vote — is unusually rare and signals that the path of New Zealand rate policy is genuinely contested, meaning subsequent meetings carry heightened sensitivity to incoming data.
Australia's trimmed mean core inflation reaching a 22-month high, even as the headline figure fell, illustrates how temporary policy measures (such as fuel excise cuts) can mask underlying price pressures and complicate central bank communication around rate decisions.
BOJ Governor Ueda framing the current oil episode as Japan's "fifth oil shock" and arguing it is more consequential than previous ones reflects a deliberate effort to shift market expectations — a signal that carries more weight than a routine policy statement because it reframes the historical baseline for how the BOJ assesses inflation persistence.
