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☆ Economists say BOJ's Amamiya is top governor candidate, tightening this week unlikely
▼ + stars: | 2023-01-16 | by ( Kantaro Komiya | ) www.reuters.com time to read: +5 min

Of the 24 economists who replied to the Jan 5-12 poll, 16, or 67%, chose Amamiya as the most likely candidate to become the next BOJ governor. Four economists in the poll, or 17%, chose Nakaso, who is seen less dovish than Amamiya, as the most likely candidate. In a September poll that asked the same question, Amamiya and Nakaso received 61% and 33% of economists' votes, respectively. Five analysts expected the unwinding of easing to start in April, at the first BOJ meeting under the new governor. Elsewhere in the poll, 83% of economists said Japanese nominal wages were unlikely to outpace rising consumer prices in 2023.

☆ Factbox: BOJ's possible next step as market attacks yield policy
▼ + stars: | 2023-01-16 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

STAND PATThe BOJ's decision last month to widen the band around its 10-year yield target has failed to remove market distortions caused by its huge bond buying, instead prompting the market to test the 0.5% upside of the range. MORE TWEAKSBond sellers broke the BOJ's 0.5% cap on Friday, less than a month after the policy tweak, forcing emergency buying from the central bank to bring the yield back down. Or it could widen the band around its 10-year yield target. ABANDON, RAISE YIELD TARGETThere is a slim chance the BOJ could raise the 10-year yield target or abandon YCC altogether. Any such move would likely be accompanied by, or come well after, the end of the 10-year yield target.

☆ Bank of Japan could announce major policy shift this week as bond yields top limit again
▼ + stars: | 2023-01-16 | by ( Jihye Lee | ) www.cnbc.com time to read: +4 min

This picture taken on October 27, 2022 shows pedestrians walking in front of the Bank of Japan (BoJ) headquarters in Tokyo. The move would come less than a month after the Bank of Japan caught markets off guard by widening its tolerance range for 10-year Japanese government bond yields. Indeed, Nikkei reported Monday that the Bank of Japan purchased JGBs worth more than 2 trillion yen ($15.6 billion) after the nation's 10-year bond yield curve topped 0.5% for two consecutive sessions. While the central bank leaving interest rates unchanged would be positive for Japanese stocks, BofA said a removal of its yield curve control policy could lead to sharp declines. HSBC, meanwhile, expects the central bank to announce further widening of the yield curve control tolerance band instead of abolishing the policy altogether.

☆ Japan's top economic panel debates potential shift away from 'Abenomics'
▼ + stars: | 2023-01-16 | by ( ) www.reuters.com time to read: +1 min

TOKYO, Jan 16 (Reuters) - The Japanese government's top economic policy panel on Monday held its first round of special sessions that will discuss the medium-to-long term direction of fiscal and monetary policies, including the pros and cons of "Abenomics". Japan pursued a reflationary policy led by monetary stimulus under former premier Shinzo Abe which has helped pull the world's No. Financial markets are, however, now more focused on if and when the central bank will pull back on monetary stimulus given sharp rises in inflation. It was not clear how many special sessions the Council on Economic and Fiscal Policy (CEFP) has planned. The sessions do not intend to discuss the Bank of Japan's exit strategy or draft new policy objectives to review a 2013 written mission statement between the government and the central bank, Cabinet Office officials said.

☆ Oil dips, but hovers near 2023 highs on China demand optimism
▼ + stars: | 2023-01-16 | by ( ) www.cnbc.com time to read: +2 min

Oil prices dipped in early Asian trade on Monday, but held close to the highest levels since the start of the year on optimism that China's reopening will lift fuel demand at the world's top crude importer. Both contracts rose more than 8% last week, the biggest weekly gain since October, after China's crude imports rose 4% year-on-year in December while Lunar New Year travel brightens the outlook for transportation fuels. Traffic levels in China are continuing to rebound from record low levels following the easing of COVID-19 restrictions, resulting in stronger demand for crude and oil products, ANZ analysts said in a note. "While there is still plenty of optimism around Chinese demand, in the near term the oil market remains relatively well supplied," ING analysts said in a note. Investors will also be watching for a key Bank of Japan (BOJ) meeting this week to determine if it would defend its super-sized stimulus policy.

Trading volume across the region may be lighter than usual on Monday because U.S. markets are closed for Martin Luther King Day. While the BOJ is expected to leave its central 'yield curve control' targets at -0.10% for short-term rates and 0% for the 10-year bond yield, all eyes will be on whether policymakers make further adjustments to yield-curve control (YCC) bands following December's surprise tweak. The BOJ may also raise its inflation forecasts on Wednesday, ahead of December inflation data on Friday. Later in the week, Bank Indonesia is expected to raise interest rates by another 25 basis points to 5.75%. Bank Negara Malaysia is expected to raise rates by a quarter point on Thursday, to 3.00%.

☆ Japan’s 10-Year Government Bond Yield Breaches New Cap
▼ + stars: | 2023-01-13 | by ( Megumi Fujikawa | ) www.wsj.com time to read: 1 min

Bank of Japan Gov. Haruhiko Kuroda has said that the new cap doesn’t represent the start of a monetary-tightening cycle, but many central bank watchers think otherwise. TOKYO—The yield on benchmark 10-year Japanese government bonds breached the 0.5% cap set by the Bank of Japan less than a month ago, as pressure grows on the central bank to tighten policy. Strong inflation data this week have sparked speculation among investors that the BOJ will join the Federal Reserve and other central banks in unwinding its easing program by lifting the cap again, or even scrapping its yield-curve control policy altogether.

☆ Dollar wobbles as U.S. inflation fuels hopes of slower Fed rate path
▼ + stars: | 2023-01-13 | by ( Ankur Banerjee | ) www.reuters.com time to read: +2 min

The dollar index , which measures the U.S. currency against six others, rose 0.059% to 102.220 but was languishing around its lowest level since June. Traders of futures tied to the Fed's policy rate bet heavily on a downshift to quarter-percentage-point rises starting at the Jan. 31 to Feb. 1 meeting and a pause just below 5%, with interest rate cuts priced in for later in the year. Carol Kong, a currency strategist at Commonwealth Bank of Australia, said the Fed would likely take comfort in the inflation report and the U.S. dollar would continue to ease. Meanwhile, the yen strengthened 0.12% to 129.10 per dollar, having touched a fresh seven-month high of 128.65 per dollar earlier in the session. The Australian dollar fell 0.11% to $0.696, while the kiwi fell 0.34% to $0.637.

Japan's Nikkei (.N225) fell 0.4% and the yen, which surged 2.7% against the dollar overnight, kept going and rose about 0.2% further to 128.65 per dollar. "No change in policy this month would be a setback for the yen," said Rabobank FX strategist Jane Foley. "However, we would look to buy the yen against the dollar on dips on anticipation of another (policy) move ... in the spring." INFLATION IN RETREATBeyond Japan, market sentiment was dominated by overnight U.S. December inflation data that landed more or less on consensus expectations. The U.S. dollar dropped 0.9% to a nine-month low of $1.0868 per euro and the risk-sensitive Australian dollar rose to a roughly five-month high at $0.6984.

☆ Morning Bid: Money in the bank
▼ + stars: | 2023-01-13 | by ( ) www.reuters.com time to read: +5 min

Kicking off the fourth-quarter corporate results season in earnest, JPMorgan, Citigroup, Bank of America, Bank of New York Mellon and Wells Fargo are among the countries biggest banks updating on Friday. It will take some twist to puncture the optimism on peak inflation and peak Federal Reserve interest rates, however. Futures markets still see rates topping out below 5% by midyear and pencil in a half point of rate cuts between then and yearend. The yen surged on speculation the Bank of Japan could revise its ultra-loose monetary policy again at next week's policy meeting. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

TOKYO, Jan 13 (Reuters) - Yields on Japan's benchmark 10-year government bonds breached the central bank's new ceiling on Friday in the market's most direct challenge yet to decades of uber-easy monetary policy. The central bank already holds 80% to 90% of some bond lines. REMEMBER THE RBAThere is talk in the markets that the central bank could shorten its yield target to three- and five-year bonds, but history abroad suggests the strain will remain. With the local economy recovering faster than expected and inflation accelerating, the RBA realised its pledge to keep three-year yields at 0.1% out to 2024 was no longer credible. So it abruptly dropped the whole thing and three-year yields spiked to 0.48%, an episode the RBA itself conceded caused "reputational damage" that would not be repeated.

☆ Take Five: Much to say in Tokyo (and Davos)
▼ + stars: | 2023-01-13 | by ( ) www.reuters.com time to read: +5 min

U.S. earnings and retail sales numbers, a slew of China data and inflation readings elsewhere mean there's plenty to mull over. Recent data showed Tokyo inflation at double the central bank's target. Reuters Graphics Reuters Graphics3/ HOPE AND FEARU.S. retail sales data and more earnings reports are on tap. Before then comes December's data deluge, with industrial output (CNIO=ECI), retail sales (CNRSL=ECI) and Q4 economic growth data (CNGDP=ECI) lining up to be ugly. Economists expect retail sales to have dropped 7.8% for a fourth straight monthly decline and for annual growth to finish up at a meagre 1.8%.

LONDON, Jan 12 (Reuters) - The yen got a boost on Thursday on expectations the Bank of Japan will review the side effects of its monetary easing, while the dollar held near a seven-month low against the euro ahead of U.S. inflation data later in the day. "You could start to see the normalisation of monetary policy which would be a huge step for Japan (and) a very positive tailwind for the yen," Turner added. The U.S. dollar index was last down 0.06% to 103.04, not far off its seven-month low of 102.93 hit earlier in the week. "Our core views for Fed policy versus ECB policy would be for a stronger euro-dollar through the year." Data released on Thursday showed Australia's trade surplus unexpectedly widened in November and came in well above forecasts.

Bonds also rose, mirroring hopes of a softer inflation report, and the U.S. dollar was near seven-month lows against a basket of currencies. Europe's STOXX 600 (.STOXX) equity benchmark index rose 0.6% to its highest since April 2022. Roberto Lottici, portfolio manager at Banca Ifigest, said he was concerned markets could potentially even react negatively to any big downside surprise in the U.S. CPI data. Foreign exchange markets elsewhere were quieter ahead of the U.S. CPI data while China's reopening kept a bid under Asia's currencies. The dollar index eased 0.1% to 103.06, not far from a seven-month low of 102.93 hit this week.

☆ BOJ more upbeat on regional Japan, wage prospects
▼ + stars: | 2023-01-12 | by ( Leika Kihara | ) www.reuters.com time to read: +1 min

TOKYO, Jan 12 (Reuters) - The Bank of Japan on Thursday offered a more optimistic view on the country's economic health and pointed to growing number of firms planning wage increases, underscoring its conviction that Japan is on track to achieve its 2% inflation target. In a quarterly report, the central bank raised its economic assessment for four of the country's nine regions. "Many regions saw their economies pick up, or pick up moderately," with Japan's re-opening of borders drawing in more overseas tourists and boosting services demand, the report said. Some firms appeared to struggle increasing pay as rising fuel and raw material costs squeezed profits, the report said. Reporting by Leika Kihara; Editing by Jacqueline Wong and Gerry DoyleOur Standards: The Thomson Reuters Trust Principles.

☆ Yen jumps, dollar in retreat ahead of U.S. inflation data
▼ + stars: | 2023-01-12 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

The yen last bought 131.50 per dollar. "The report is likely to add to the (yen) optimism," said Saktiandi Supaat, regional head of FX research and strategy at Maybank. Elsewhere, the dollar was adrift ahead of the closely watched U.S. inflation data, which could provide more clarity on how much inflation in the world's largest economy has moderated and on the Federal Reserve's rate-hike path. The U.S. dollar index fell 0.07% to 103.05, not far off its seven-month low of 102.93 hit earlier in the week. Data released on Thursday showed that Australia's trade surplus unexpectedly widened in November and came in well above forecasts.

☆ Morning Bid: RIP YCC?
▼ + stars: | 2023-01-12 | by ( Wayne Cole | ) www.reuters.com time to read: +3 min

SYDNEY, Jan 12 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole. This, presumably, refers to the fact that 10-year yields have been stuck at the new YCC ceiling of 0.5% for four sessions, even while the BOJ has been busy buying bonds in bulk to get them down. Then again, the market had thought the same last month when the central bank wrongfooted everyone by widening its YCC band. Whatever the decision, time is ticking for YCC and maybe even negative rates in Japan. As for U.S. CPI, the market is clearly priced for a dovish outcome, so there's some risk of disappointment.

☆ Stocks becalmed before potential CPI storm
▼ + stars: | 2023-01-12 | by ( Tom Westbrook | ) www.reuters.com time to read: +4 min

European futures rose 0.4%. Bonds held overnight gains and the U.S. dollar was pinned near a seven-month low at $1.0769 per euro . "(It) is the CPI number that could help settle the debate for the February meeting," said NatWest Markets' U.S. rates strategist Jan Nevruzi. U.S. Treasuries added a little to overnight gains, with benchmark 10-year yields down 3.7 bps to 3.5189% and 30-year yields down 4.4 bps to 3.6375%. Foreign exchange markets were elsewhere holding their breath ahead of CPI data while China's reopening kept a bid under Asia's currencies.

☆ Asia stocks hit 7-month high on China and CPI bets
▼ + stars: | 2023-01-12 | by ( Tom Westbrook | ) www.reuters.com time to read: +4 min

Following gains for Wall Street indexes overnight, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.5% and touched an almost seven-month high. Bonds were bought around the world overnight and the U.S. dollar wavered, to touch a seven-month low at $1.0776 per euro . "(It) is the CPI number that could help settle the debate for the February meeting," said NatWest Markets' U.S. rates strategist Jan Nevruzi. "We expect a below consensus CPI print, which if it materialises, could push this rally even further." Foreign exchange markets were elsewhere holding their breath ahead of CPI data while China's reopening kept a bid under Asia's currencies.

☆ Yen jumps; dollar tentative ahead of U.S. inflation data
▼ + stars: | 2023-01-12 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

The yen last bought 131.92 per dollar. "The report is likely to add on to the (yen) optimism," said Saktiandi Supaat, regional head of FX research and strategy at Maybank. Elsewhere, the dollar stood cautiously steady ahead of the closely watched U.S. inflation data out later on Thursday, which will provide more clarity on how much inflation in the world's largest economy has tamed and on the Federal Reserve's rate-hike path. Australian inflation data released on Wednesday showed that annual inflation re-accelerated to 7.3% in November, after a surprise dip to 6.9% in October, underscoring the challenge facing the Reserve Bank of Australia as it tries to cool the economy. The Chinese offshore yuan rose to a five-month top of 6.7545 per dollar on Thursday.

☆ IMF's Georgieva says Japan not facing increased inflationary pressures
▼ + stars: | 2023-01-12 | by ( ) www.reuters.com time to read: +1 min

WASHINGTON, Jan 12 (Reuters) - International Monetary Fund Managing Director Kristalina Georgieva on Thursday said the Bank of Japan was conducting an appropriate review of its monetary policy stance, but should keep policy accommodative because the country faces low inflationary pressures. Georgieva told reporters that an adjustment to the central bank's debt yield curve control regime was not driven by an increase in inflation, which remains very close to the bank's 2% target. The pressure from labor on increases in labor compensation has not led to any dramatic change. At the time, BOJ Governor Haruhiko Kuroda said the move was aimed at prompting increased bond purchases and was a fine-tuning of the central bank's ultra-loose monetary policy rather than a withdrawal of stimulus. Georgieva said it was appropriate for the central bank to take a cautious approach to its monetary policy.

☆ Morning Bid: Disinflation elation
▼ + stars: | 2023-01-12 | by ( ) www.reuters.com time to read: +5 min

Whether the Federal Reserve policymakers will publicly chime with the disinflation narrative or not, many acknowledge their policy stance is now 'data dependent' from here. And unless disavowed of it by hard evidence, markets already assume the inflation battle is as good as won. The dollar and U.S. Treasury yields were slightly lower. China's inflation rate crept back up last month too but it remains below 2% and annual producer price inflation is still in negative territory. Although UK bond yields and sterling skidded lower on Wednesday in mix of recession concerns and energy price disinflation hopes, there was better news on the retail front today.

☆ BOJ's 2% inflation target can be tweaked to 'range', deputy governor candidate says
▼ + stars: | 2023-01-11 | by ( Kantaro Komiya | ) www.reuters.com time to read: +2 min

TOKYO, Jan 11 (Reuters) - The Bank of Japan's (BOJ) 2% inflation target can be modified into a "range" to sustain monetary policy flexibility amid possibly higher inflation compared to pre-COVID times, former board member Sayuri Shirai said on Wednesday. Shirai, widely seen as a candidate to become deputy governor at the central bank this spring, also said there should be a review of Japan's monetary policy over the past 10 years. "Given the chance inflation may stay elevated compared to pre-pandemic, we must be careful about abolishing the 2% inflation target and I think making it a range is one possibility." The BOJ, long preoccupied with reviving price growth to avert a risk of deflation, has been an outlier among central banks this year. The new BOJ leadership after the incumbent governor Haruhiko Kuroda's term ends in April should conduct a policy review, Shirai said, as she had the impression the central bank's communication with markets had become slightly "complex".

"There are plenty of other people who can take measures to combat climate change and I worry that people, in their great enthusiasm for doing good, are actually putting at risk central bank independence," King said. They were in a minority in a conference packed with central bankers who had long accepted they had some duty towards the environment and, in many cases, were already taking some steps. "It would be misleading to use tighter financing conditions as a scapegoat for further delays in the green transition," Schnabel said. "By saying we have a role to play in helping to finance the green transition... we are increasing this misunderstanding of what our role is," said Wunsch, Belgium's central bank governor. Singapore's Ravi Menon, meanwhile, said central bankers should do much more to help the economy reduce its emissions than just focussing on the risks.

The euro edged up 0.01% against the greenback to $1.0733 at 10:30 a.m. EST (1530 GMT), just below its seven-month high of $1.07605 hit Monday. Investors now expect rates to peak just under 5% by June, before starting to come down later in the year. The pause in the dollar's decline comes as traders ready themselves for U.S. Consumer Price Index (CPI) inflation data on Thursday. The China-sensitive Australian dollar spiked at a more than four-month peak of $0.6950 in the previous session. The offshore yuan last traded at 6.7878 per dollar, after hitting its strongest in five months of 6.7590 earlier in the session.

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