Asia Summary and Highlights 15 Mar
Suzuki says Japan is no longer in deflation as strong trend of wage hikes happening now
Asia Session
Suzuki says Japan is no longer in deflation as strong trend of wage hikes happening now, which seems to prove earlier local media report right. It is a walk over as the Japanese government denied such report last week. However, the headline has limited impact as market participants have already priced in a policy change in April the latest. A hawkish tilt would be a signal for March hike, an official change in rhetoric is not enough. Apart from Suzuki, we also heard from Japan Chief Cabinet Secretary Hayashi saying he expects the BoJ to stably hit its inflation target. The stars are lining up but our central forecast remains a March forward guidance change and April hike as very likely BoJ would wait for the 2nd and 3rd round of negotiation to ensure small and medium firms hike by similar magnitude. USD/JPY erased earlier gains to still trade 0.06% higher at 148.39 with JGBs yields outpacing U.S. T-yields.
Global risk sentiment is weak on Friday morning with regional equity indexes falling the hardest, HSI by 2.1%. PBoC tried to fix the onshore Yuan but still see the currency slightly weakens even with the biggest gap in fixing expectations for almost a year. Combined with stronger USD, the AUD/USD is down 0.27% to 0.6563, NZD/USD drop more by 0.48% to 0.6100 while USD/CAD rose 0.04%. Else, EUR/USD is down 0.06% and GBP/USD is down 0.12%.
North American session
The USD gained ground through the North American session following stronger than expected PPI data and lower than expected jobless claims, despite weaker than expected retail sales. EUR/USD lost around half a figure to trade below 1.09, and USD/JPY gained around half a figure to 148.30.
February retail sales with a 0.6% increase have not fully reversed a 1.1% decline seen in January and hint at some loss of consumer momentum in Q1. However initial claims at 209k from a downwardly revised 210k suggest the labor market remains strong in early March while February PPI with a 0.6% increase, 0.3% ex food and energy, backs the CPI’s message of stronger inflationary pressures in early 2024.