The BoJ delivered a historical hike – its first in 17 years – last week. Does this mark the turning point for Japan for good, or do risks still linger?
Something for your Espresso: Unions paving the way for Ueda
>5% wage gains for the Rengo union members in Japan, which paves the way for policy action from the BoJ. Meanwhile, the PBOC refrained from cutting. Possibly as rate cuts are off the table in the US given the PPI developments?
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Rotating EM Flows: From Japan to Emerging Asia
Japan has reemerged as a feasible investment these last years, but is the driving force of this performance ebbing, as China returns to the table? A look at the relative winners and losers if China in fact is returning.
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Something for your Espresso: Big in China instead of Japan?
Sentiment in Japanese stocks has weakened ahead of a potential lift-off on front-end rates in March, while the JPY FX case looks compelling still. Meanwhile, Chinese sentiment is improving both directly and via proxies.
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Something for your Espresso: The inflation target is coming into sight
Takata from the BoJ has truly restarted speculations in action from the BoJ already in April as he labeled the inflation target as “coming into sight”. Meanwhile, the EUR-flation target may be coming into sight from the other direction despite lukewarm releases today.
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Something for your Espresso: There is no inflation problem in Japan
Japanese inflation has been trending clearly below 2% over the past 3-4 months and it seems like the so-called “inflation-problem” is non-existent in Japan. Meanwhile, China continues to look like a compelling case.
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Something for your Espresso: Make or break inflation week!
We need a very soft inflation report from the Euro area to bring back hopes of ECB spring action. We lean dovish, but dovish enough?
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Something for your Espresso: Bye bye NIRP and growth?
Japan has entered a technical recession, but markets remain homed in on a few small hikes to bring Japan out of NIRP-territory. Meanwhile, the inflation evidence keeps diverging elsewhere.
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5 Things We Watch: UK & US CPI, Gaza, JPY, and Banks
The US CPI dealt a harsh blow to risk assets and those betting on disinflation, yet the trend of easing price pressures persists globally, as highlighted by the latest UK inflation report out this morning. Discover more in our “5 Things We Watch” below!
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Trade Alert: Playing Steep vs Safe
We have taken on a new FX position and have pinned another to the watchlist. See details below
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Equity Watch: Japan – Board or abort Nikkei 225?
The Japanese Nikkei 225 has, apart from yesterday’s move lower, been on a streak of strength since the turn of the calendar. So, with its Asian peer on the ropes and the toned down remarks from members of the BoJ regarding inflation, is the index a buy from here?
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Something for your Espresso: No hike if you cut!
The Bank of Japan is unlikely to move the needle, if the Fed cuts rates. It is now a relative game between Ueda and Powell. Meanwhile markets are pricing a growing inflation divergence in G10 space.
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5 Things We Watch: USD-flation, Global Inflation, US Labor Market, Japan, Bitcoin
Things are starting to look a little troublesome for the US economy in the mid-term as re-accelerating inflation and a weakening labor market is no easy cocktail for the Fed. Read more here together with some notes on freight rates, Japan and the new BTC ETF.
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Something for your Espresso: Saudi Arabians losing the battle?
The bearish price action continues in oil, while the BoJ meeting in December is suddenly seen as “live” by market participants. Can BoJ move the needle before year-end?
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Credit Nugget – Who’s got the tightest standards, and what does it mean for credit spreads
As SLOOS-alike reports have come in for both EU and Japan, we have a look at the differences in credit surveys across the Atlantic, and which credit spreads to look out for in the time to come
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Something for your Espresso: The most hawkish BoJ in decades?
The Bank of Japan opens the door for >1% 10yr bond yields alongside a large revision of inflation forecasts and yet the JPY weakens again – exactly as we anticipated. Meanwhile, the US Treasury issuance bazooka was nowhere to be seen, or was it?
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Trade Alert: Exploiting the weaknesses in Japan
Japan is one of the most energy sensitive countries in the world and the BoJ is not (truly) willing to underpin the JPY. We aim at exploiting this in a RV trade in Asia.
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Japan Watch: How will Ueda cope with all of the “pauses”?
Ueda has got the situation under control and managed to orchestrate a whole string of positive market developments on the back of his monetary policy mix. There are no major reasons to change course. Steepen the JPY curve slowly, while accommodating the short-end.
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Something for your Espresso: The Japanese fear of becoming a release valve
Masato Kanda threatens with intervention in JPY as the Japanese case risks becoming the release valve for pressures in China. Equity markets behave as we expected given the renewed pressure >7.30 in USDCNY.
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Steno Signals #59 – When it rains on Janet Yellen, it pours!
The Bank of Japan has fueled a global curve steepening and the US Treasury is forced to emphasize the trend with substantial ramifications for liquidity, rates, FX and equities. Here is how we play it!
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Something for your Espresso: Duration is hard to swallow
The market struggles with duration issuance as the positioning is already loaded with bonds, while the BoJ keeps weakening the JPY (on purpose) as they continue to crowd out investments.
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Japan Watch: Flows in JPY and JGBs after the YCC decision
How on earth can the JPY weaken when 10yr JPY yields are on the rise? We look at flows and investment mandates and how they impact the JPY and JGBs. We still see 150+ on the horizon for USDJPY.
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Japan Watch: 1% with added flexibility – more or less printing from here?
The Bank of Japan did indeed move the needle as the big spike in the short-term inflation forecast provided them with an excuse. The big question is whether the move will lead to more or less printing? And whether the packaging is dovish enough to keep markets calm?
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Japan Watch: The pros and cons for Ueda
It seems carved in stone that the Bank of Japan will have to revise the inflation path higher again in projections but will it be enough for Ueda to move the needle on the yield curve control? Here is our list of pros and cons and our base-case!
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5 Things We Watch – PMIs, FX, Japan, Brazil, Inflation
This week our primary focus is the current business cycle, where we try to figure out which stage we are in, and what outlook different asset classes are pricing in. Today’s edition of ‘5 Things We Watch’ is no exception.
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Japan Watch – Buy the JPY? >150 more likely than <130 in USDJPY
With the recent move in swap rates and the JPY, we have once again looked into Japan to find out when BoJ will do something about their policy and if the Yen is a viable option for your portfolio. JPY looks more like a sell than like a buy here.
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5 Things We Watch – US CPI, Japan, Positioning, Fed Borrowing and Oil
With the US inflation report coming in later today, we have a look at the 5 things that we are keeping an eye out for in markets.
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Something for your Espresso: One thing is certain – ECB sources!
The ECB members agree on a hike in July, but September is still in doubt after what may have been the most hilarious update to staff projections in recent years. Rear-view mirror policy-making continues.
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Something for your Espresso: An ISM report with “pause” tattooed all over it while the RBA hikes
The ISM Services report had “pause” tattooed all over, while the RBA hiked this morning in a surprise move. Is the RBA a harbinger for the BoJ? We also took notice of the WSJ story in increasing capital requirements for banks.
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Earnings Watch: Which Equity markets offer the best opportunities across the Pacific?
The U.S. and Japanese equity markets present a contrast in earnings expectations, driven by differing economic conditions and monetary policies. Will the optimism for U.S. earnings growth last, and has the immense influx of capital to Japanese markets overbid fair value?
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