Morning from Europe.

The Japanese Services PPI printed at 2.3% overnight, which is a strong hint that underlying price pressures are establishing themselves at or just above the 2% handle in Japan.

Governor Ueda later said that there are signs of a virtuous wage to price cycle, but that the outlook remains too uncertain to base decisions on it.

The discussions on bringing policy rates above 0% in Japan have always been aimed at a late Q1-2024 timing (before year-end, means before fiscal year-end) and we therefore remain unconvinced that they will manage to use this window of opportunity to hike front-end rates before it is “too late”.

Chart 1: PPI pressures are broadening in Japan