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☆ Japan finmin warns of severe finances as BOJ struggles to contain yields
▼ + stars: | 2023-01-23 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +3 min

The Ministry of Finance estimates that every 1-percentage-point rise in interest rates would boost debt service by 3.7 trillion yen ($29 billion) to 32.5 trillion yen ($251 billion) for the 2025/2026 fiscal year. "The government will strive to stably manage Japanese government bond (JGBs) issuance through close communication with the market," he said. "Overall JGB issuance, including rolling over bonds, remain at an extremely high level worth about 206 trillion yen ($1.6 trillion). We must secure fiscal space under normal circumstances to safeguard trust in Japan and people's livelihood at a time of emergency." lABOUR REFORMPrime Minister Fumio Kishida echoed Suzuki's resolve to revive the economy and tackle fiscal reform.

☆ Morning Bid: Euro rising
▼ + stars: | 2023-01-23 | by ( Wayne Cole | ) www.reuters.com time to read: +2 min

SYDNEY, Jan 23 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole. It's been a quiet start to the week in Asia with much of the region on holiday. U.S. stocks futures are near flat, but EUROSTOXX futures added 0.5% to extend their recent bullish run. Analysts assume the same sea change will deliver an improvement in the EU flash PMIs for January this week, likely outperforming the U.S. surveys. Key developments that could influence markets on Monday:- ECB's Lagarde and Panetta are appearing- No major economic data due on Monday.

☆ Euro clears 9-month peak as ECB hawks let fly
▼ + stars: | 2023-01-23 | by ( Wayne Cole | ) www.reuters.com time to read: +3 min

The euro reached as far as $1.0903 , breaking the recent peak of $1.08875 and opening the way to a spike top from last April at $1.0936. It was aided by European Central Bank (ECB) governing council member Klaas Knot, who said interest rates would rise by 50 basis points in both February and March and continue climbing in the months after. A Reuters survey of analysts also favoured a hike of 50 basis points in March and an eventual top of 3.25%. Investors also have around 50 basis points of U.S. rate cuts priced in for the second half of the year, reflecting softer data on inflation, consumer spending and housing. read moreAny hint the replacement is less dovish than current governor Haruhiko Kuroda could see the yen climb anew.

☆ Bank of Japan's policy tweak drew rare request from government for a break
▼ + stars: | 2023-01-23 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

TOKYO, Jan 23 (Reuters) - Government representatives who attended the Bank of Japan's policy meeting in December were granted a half-hour adjournment to contact their ministries, minutes showed, a sign the decision to tweak its yield control policy may have been hastily arranged. At the Dec. 19-20 meeting, the BOJ kept its ultra-easy monetary policy but shocked markets with a surprise tweak to its yield curve control (YCC) policy that allowed long-term interest rates to rise. Governor Haruhiko Kuroda approved the request as chair of the BOJ meeting, according to the minutes. The two representatives did not voice opposition to the yield control tweak nor any other elements of the BOJ's discussion, the minutes showed. Two government representatives - one from the MOF and another from the Cabinet Office - are legally entitled to attend BOJ policy meetings and voice the government's views on policy decisions, though they cannot cast votes.

☆ Euro nears nine-month peak as ECB hawks let fly
▼ + stars: | 2023-01-23 | by ( Wayne Cole | ) www.reuters.com time to read: +3 min

The euro crept ahead to $1.0870 and nearer its recent nine-month peak of $1.08875. It was aided by European Central Bank (ECB) governing council member Klaas Knot, who said interest rates would rise by 50 basis points in both February and March and continue climbing in the months after. Much the same argument goes for sterling, with markets wagering the Bank of England will hike by half a point to 4.0% at its policy meeting next week. Analysts assume the BOJ will stand the line until at least the next policy meeting in March, though one hurdle will be the expected naming of a new BOJ governor in February. For now, the dollar was holding at 129.40 yen , following last week's wild gyrations between 127.22 and 131.58.

☆ Japan's finance minister warns of severe finances as BOJ struggles to contain yields
▼ + stars: | 2023-01-23 | by ( ) www.cnbc.com time to read: +1 min

Morning commuters in front of the Bank of Japan headquarters in Tokyo, Japan, on Jan. 16, 2023. Japan's finances are becoming increasingly precarious, Finance Minister Shunichi Suzuki warned on Monday, just as markets test whether the central bank can keep interest rates ultra-low, allowing the government to service its debt. Japan's public debt is more than double its annual economic output, by far the heaviest burden in the industrialized world. The government has been helped by near-zero bond yields, but bond investors have recently sought to break the Bank of Japan's (BOJ) 0.5% cap on the 10-year bond yield, as inflation runs at 41-year highs, double the central bank's 2% target. "Japan's public finances have increased in severity to an unprecedented degree as we have compiled supplementary budgets to respond to the coronavirus and similar issues," Suzuki said in a policy speech starting a session of parliament.

☆ Japan's Kishida says he will nominate new BOJ head next month
▼ + stars: | 2023-01-22 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +2 min

[1/2] Japan's Prime Minister Fumio Kishida speaks during a news conference following the US-Japan summit in Washington, U.S., January 14, 2023. REUTERS/Julia Nikhinson/FilesTOKYO, Jan 22 (Reuters) - Japanese Prime Minister Fumio Kishida said on Sunday he would nominate a new Bank of Japan governor next month, as markets test whether the central bank will change the ultra low-rate policy of the dovish Haruhiko Kuroda. The BOJ stuck to its ultra-easy policy on Wednesday, defying investors who have recently sought to break the bank's cap on the 10-year government bond yield. But with even Kuroda sounding bullish about wage rises, expectations are growing that the BOJ will end its expansionist experiment this year. There is also speculation about changes to a policy accord between the central bank and the government, in which the BOJ pledges to achieve its 2% inflation target as early as possible.

☆ Japan PM keeps markets guessing on new BOJ governor
▼ + stars: | 2023-01-22 | by ( ) www.reuters.com time to read: +2 min

[1/2] Japan's Prime Minister Fumio Kishida speaks during a news conference following the US-Japan summit in Washington, U.S., January 14, 2023. REUTERS/Julia Nikhinson/FilesTOKYO, Jan 22 (Reuters) - Japanese Prime Minister Fumio Kishida said on Sunday that he would take the April economic situation into account when choosing the next Bank of Japan (BOJ) governor, keeping markets guessing who may replace incumbent Haruhiko Kuroda. Speculation is rife among some market players that the central bank may shift away from its stimulus policy when the BOJ leadership changes. There's also talk about possible changes to the policy accord between the central bank and the government in which the BOJ pledges to achieve its 2% inflation target at the earliest possible time. The BOJ stunned markets last month by doubling the allowed band to 50 basis points either side of its 0% 10-year yield target.

☆ Davos 2023 BOJ's Kuroda vows to keep ultra-loose policy
▼ + stars: | 2023-01-20 | by ( ) www.reuters.com time to read: +2 min

DAVOS, Switzerland, Jan 20 (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Friday the central bank will continue its current "extremely accommodative" monetary policy to achieve its 2% inflation target in a stable, sustainable manner. "Our hope is that wages will start to rise, and that could make our 2% inflation target met in a stable and sustainable manner. Kuroda said the BOJ's decision to widen the band around its 10-year bond yield target was "perfectly right," brushing aside criticism that the move failed to iron out market distortions, and instead fueled speculation of additional tweaks to its yield curve control (YCC) policy. "All in all, the government's policy, coupled with the BOJ's extremely accommodative policy, have been successful in changing Japan's economic structure and growth prospects," he said. "But our 2% inflation target has not been achieved in a sustainable, stable manner," he said.

☆ Japan Core Inflation Hits 4% for First Time in Four Decades
▼ + stars: | 2023-01-20 | by ( Megumi Fujikawa | ) www.wsj.com time to read: 1 min

A pickup in inflation is likely to fuel market expectations that the Bank of Japan will abandon its policy of capping the 10-year government bond yield. TOKYO—Core consumer-price inflation in Japan reached a fresh 41-year high of 4% in December, adding to pressure on the Bank of Japan to unwind its decadelong monetary easing. Although the BOJ stood pat on policy this week, the rise in inflation is likely to fuel market expectations that the central bank will abandon its policy of setting a cap on the 10-year government bond yield. It raised the cap to 0.5% in December.

☆ Asian stocks edge up, dollar sags as markets mull Fed risks
▼ + stars: | 2023-01-20 | by ( Kevin Buckland | ) www.reuters.com time to read: +3 min

U.S. Treasury yields remained elevated in Tokyo after bouncing off four-month lows overnight. Asian markets showed some resilience despite a selloff on Wall Street overnight, with the S&P 500 (.SPX) losing 0.76%. Worries about more Fed tightening were heightened by robust U.S. employment data and fresh hawkish rhetoric from central bank officials. The market bets the policy rate will been just below 5% in June, implying just over 50 basis points of additional tightening. The benchmark 10-year Treasury yield was around 3.4% after bouncing off the lowest since mid-September at 3.321% overnight.

☆ BOJ may have crafted new tool for post-YCC era - analyst
▼ + stars: | 2023-01-20 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

The BOJ maintained ultra-low interest rates on Wednesday, including a 0.5% yield cap, but crafted a new policy tool to defend the ceiling and keep yields across the curve from rising too much - without having to ramp up its bond purchases. Specifically, the BOJ amended rules for an existing market operation tool, so it can pump funds extending up to 10 years in variable rates to financial institutions against collateral. Unlike its bond-buying operation, the fund-supply tool allows the central bank to push down borrowing costs with a wall of money - without having to worry about drying up bond market liquidity with its massive purchases, analysts say. "With this new tool, the BOJ may have prepared for when it ends YCC and begins normalising monetary policy," Inoue told Reuters on Thursday. "If the BOJ sees the need to set a new policy rate for shorter-maturity yields after ditching the 10-year yield target, this fund-supply operation could come in handy," he said.

☆ Explainer: How the BOJ's new yield-controlling tool works
▼ + stars: | 2023-01-20 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

Specifically, the BOJ amended rules for an existing market operation tool, so it can pump funds extending up to 10 years in variable rates to financial institutions against collateral. While the new tool could keep bond bears at bay, there is uncertainty on how effective it would be in keeping long-term interest rates from rising. Defying bets of a policy tweak, the BOJ kept ultra-low interest rates and the 0.5% yield cap on Wednesday. It is unusual for central banks to use funds-supplying operation, typically focused on guiding short-term interest rates, to influence long-term rates. By tweaking the tool, the BOJ can enhance its control over interest rate moves and risks stifling market-driven asset pricing.

☆ Dollar subdued as growth concerns mount, yen retreats
▼ + stars: | 2023-01-20 | by ( Ankur Banerjee | ) www.reuters.com time to read: +3 min

The dollar index , which measures the U.S. currency against six peers, rose 0.069% to 102.090, not far off the seven-month low of 101.51 it touched on Wednesday. The index is down 1.3% so far this year after sinking 7.7% in the last three months of 2022 as investors bet that the Federal Reserve will slow the pace of its interest rate hikes. With little economic data scheduled on Friday, Kong said currency market moves will hinge on overall risk sentiment, with major currencies likely to trade in narrow ranges. ING economists said the intense scrutiny of the U.S. growth story means that the dollar remains vulnerable to data releases as markets keep scaling back Fed rate expectations. The Australian dollar rose 0.14% versus the U.S. currency to $0.692.

SINGAPORE, Jan 20 (Reuters) - Japan's central bank appears to have scored an interim win in its long-drawn battle with bond bears. The Bank of Japan's (BOJ) policy meeting this week was, at first glance, a damp squib for excited markets. It maintained its cap on 10-year yields, defying market expectations for change, and modified a funds-supply operation such that it offers more money for longer tenors to banks. After Wednesday's decision to retain ultra-low rates, 10-year bond yields, which had been testing the BOJ's 0.5% cap for a week, settled below 0.4%, suggesting many speculators were closing positions. "Most people are concerned about market liquidity in the bond market," a senior trader at a global bank in Asia told Reuters.

☆ Morning Bid: Fret about debt?
▼ + stars: | 2023-01-20 | by ( ) www.reuters.com time to read: +2 min

A new worry has been added to investors' inbox of angst: the U.S. debt ceiling, with the U.S. government hitting its $31.4 trillion borrowing limit on Thursday. Just two days back, the BOJ defied market expectations and stood by its yield curve control policy, but the market is willing to bet that the central bank will soon change its tune. Speaking of central banks, the European Central Bank has pushed back strongly against market bets that it would deliver smaller rate hikes as a result of easing inflation. Investor focus will be on UK retail sales for December, which are expected to rise 0.5%, to gauge how consumer spending held up during Christmas in the face of a cost-of-living crisis. Meanwhile, another one bites the dust on planet crypto after a lending unit of crypto firm Genesis filed for bankruptcy protection.

☆ Dollar climbs against yen as BOJ affirms ultra-easy policy
▼ + stars: | 2023-01-20 | by ( ) www.cnbc.com time to read: +2 min

Speculators are betting that the BOJ, the last major central bank to still employ loose monetary policy, is edging towards a shift to a tighter stance. That has driven a rally in the yen that has pushed the dollar/yen pair down by 14% in the past three months. So between now and the next meeting, there is no policy shift and that is indicated by Kuroda," he added. The dollar rose as high as 130.60 yen and was last up 0.9% at 129.58. On the week, the dollar rose 1.3% versus the Japanese currency.

☆ Bank of Japan defends yield curve control measures, intends to stick to ultra-easy monetary policy
▼ + stars: | 2023-01-20 | by ( Sam Meredith | ) www.cnbc.com time to read: +1 min

Bank of Japan Governor Haruhiko Kuroda on Friday defended the central bank's decision to widen the trading band in its yield curve control program and committed to continuing the BOJ's "extremely accommodative" expansionary monetary policy. His comments at Davos come shortly after the central bank defied market expectations by sticking to a core tenet of its ultra-loose monetary policy. The BOJ on Wednesday opted to keep its ultra-dovish -0.1% interest rate unchanged and maintained its yield curve tolerance band. It leaves the BOJ at odds with other major central banks, which have hiked interest rates in a bid to tackle rising inflationary pressure. Nonetheless, the world's third-largest economy reported core consumer prices rose to 4% on an annualized basis in the final month of last year, double the central bank's target of 2%.

TOKYO, Jan 19 (Reuters) - The Bank of Japan may raise a cap set around its 10-year bond yield target to 0.75% or double it to 1.0% by around mid-year if inflation overshoots its expectations, Columbia University academic Takatoshi Ito said on Thursday. Depending on inflation and wage developments, the central bank may also abandon negative rates by raising its short-term interest rate target from -0.1% by the end of this year, Ito told Reuters in an interview. Ito, who is a close associate of BOJ Governor Haruhiko Kuroda's, is considered by some analysts as a candidate to join the central bank's leadership when the terms of Kuroda and his two deputies end in the coming months. Kuroda's term is up in April, while those of his two deputies expire in March. Reporting by Leika Kihara and Takaya Yamaguchi Editing by Chang-Ran KimOur Standards: The Thomson Reuters Trust Principles.

☆ Dollar rises on safe haven bids; yen regains footing
▼ + stars: | 2023-01-19 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

FILE PHOTO: A U.S. hundred dollar bill and Japanese 10,000 yen notes are seen in this photo illustration in Tokyo, February 28, 2013. The fresh wave of risk aversion - compounded by news of job cuts by tech giants Microsoft and Amazon - also kept the dollar in bid. The euro was last 0.39% lower at 138.58 yen, while sterling fell 0.23% to 158.27 yen, as markets continued to test the resolve of the BOJ’s ultra-dovish stance. “While there’s still high expectations for a policy shift ... I think that will keep the yen pretty elevated in the near term.”Elsewhere, the kiwi fell 0.31% to $0.6425.

If inflation stays around 2% and Japan sees significant wage hikes, the BOJ could normalise monetary policy. "Supply shock is behind the recent pick-up in inflation," said Yasunari Ueno, chief market economist at Mizuho Securities. Dai-ichi Life's Shinke expects core consumer inflation to accelerate further in January, before slowing due to the effect of government subsidies aimed at curbing utility bills. The base effect of last year's sharp rise in consumer prices will also slow the pace of increase in inflation later this year, analysts say. BOJ Governor Haruhiko Kuroda, whose term will end in April, has stressed the need to keep monetary policy ultra-loose until wages rise more, changing the recent cost-push inflation into inflation driven by robust domestic demand.

☆ Analysis: BOJ bullishness on wages suggests days of super-low rates are numbered
▼ + stars: | 2023-01-19 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

Kuroda likely put YCC on life support so his successor can strategise an orderly exit, said former BOJ official Nobuyasu Atago. He said the bank could raise the 0.5% yield cap to as high as 1% around mid-year and ditch negative rates by year's end. The parent of casual clothing giant Uniqlo says it will raise wages as much as 40%. "If the BOJ ends negative rates, that would widen the spread between deposit and lending rates so would definitely be positive for us," he said. With YCC creaking under market pressure, the BOJ may not be able to wait too long.

The increase in the core consumer price index (CPI), which excludes volatile fresh food but includes oil costs, matched a median market forecast and followed a 3.7% annual gain seen in November. The annual rise in core CPI thus exceeded the BOJ's 2% target for a ninth straight month. We might see inflation stay above the BOJ's 2% target well into autumn this year," he said. Core-core CPI, which strips away both fresh food and energy costs, was 3.0% higher in December than a year earlier, accelerating from a 2.8% gain seen in November. The BOJ kept monetary policy ultra-loose on Wednesday but raised its inflation forecasts in fresh quarterly projections, as companies continued to pass on higher raw material costs to households.

☆ Recessions risks knock stocks, speculators drawn back to yen
▼ + stars: | 2023-01-19 | by ( Tom Westbrook | ) www.reuters.com time to read: +3 min

The Nikkei dip and the bounce for the yen suggest such speculation is here to stay, at least for now. April was another possibility, she added, since by then the BOJ would have a new governor. "My guess would be that more speculators would look to build positions going into these meetings." Microsoft's announcement of 10,000 layoffs and hawkish comments from Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard added to the gloom, with both Fed officials expecting U.S. interest rates above 5% this year. The Australian dollar was last down 0.5% at $0.6907, losing ground after data showed an unexpected fall in Australian employment last month.

[1/2] A shopper looks at packs of vegetables at a market at a shopping district in Tokyo, Japan, December 6, 2015. To match JAPAN-ECONOMY/TANKAN REUTERS/Yuya ShinoJan 20 (Reuters) - A look at the day ahead in Asian markets from Jamie McGeever. Japanese consumer price inflation is expected to have hit a new 41-year high of 4.0% in December, up from 3.70%. chartThis will mark the ninth straight month of inflation above the BOJ's 2% target. Risk appetite in Japan is holding up well, with the Nikkei 225 on course for its best week since November.

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