STIR: BOJ-Dated OIS Pricing Little Changed After BOJ Dep Gov Himino Speech

In Tokyo morning trade, JGB futures are little changed, +1 compared to settlement levels, after bouncing off after-market lows.

• (Bloomberg) “Japanese Prime Minister Sanae Takaichi’s long-term vision for powering the nation’s growth through domestic investment risks becoming a hollow ambition if she fails to address shorter-term angst over the cost of living. Takaichi has rolled out a plan to generate ¥370 trillion of domestic investment over the next 14 years, but there’s less clarity on how much the government will need to contribute to support this vision and where that money will come from.”
• The BOJ is widely expected to leave policy unchanged this week, but officials are increasingly open to a September rate hike after June's increase had little impact on financial conditions. While economists still favour a December move, persistent inflation and resilient economic activity have strengthened the case for earlier tightening.
• Today, the local calendar will be empty apart from an Auction for Enhanced-Liquidity 5-11 YR.
• Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest gains. There was decent two-way positioning volumes with focus on Wednesday's FOMC policy announcement - likely hold/hawkish hold - projected rate hike fully priced in for the September 16 meeting.
• Cash JGBs and swaps are slightly richer. 

Bloomberg Finance LP

Wednesday’s June/Q2 CPI will be an important input into the 11 August RBA decision. Governor Bullock speaks today on “Monetary Policy in an Era of Shocks” but Assistant Governor Hunter’s fireside chat on Thursday will be the only opportunity to hear what the central bank thinks about the inflation outcomes ahead of the next meeting.

• Headline June CPI is expected to be stable around 4.0% y/y but given it continues to be distorted by government policy and its timing, the focus will remain on the underlying trimmed mean.
• June trimmed mean is forecast to rise 0.1pp to 3.7% y/y and Q2 0.9% q/q bringing the annual rate to 3.7% y/y up from Q1’s 3.5% but slightly below the RBA’s May projection of 3.8%. It had another 35bp of tightening by end-2026 in its forecasts to bring core inflation down and within its target band by H2 2027.
• Analysts’ expectations for trimmed mean are heavily centred on 3.7% y/y for both Q2 and June with a very narrow range of 3.6-3.8% y/y for Q2. All four large domestic banks are forecasting 3.7% y/y as well as 0.9% q/q.
• There is some more variation for headline with Q2 CPI ranging from 0.6-1.1% q/q and 4.0-4.5% y/y, below the RBA’s 4.8% projection. ANZ is the only big 4 bank not at consensus forecasting 0.6% q/q.
• June ranges from -0.1% to +0.5% m/m and 3.8%-4.3% y/y with Bloomberg consensus at 0.2% & 4.0%. NAB and CBA are in line with this while ANZ is lower at flat & 3.8% and Westpac higher at +0.4% & 4.2%.
• The 30c reduction in fuel excise on April 1 helped to contain retail prices with petrol down 1% q/q in Q2 but diesel still up 20% q/q. In June, petrol fell 9% m/m and diesel 15.8% m/m. 

A quiet start for the antipodeans as US equities completely reversed lower overnight and this has flowed into the Asian session(KOSPI, -8%). Yet Trump has hinted at a possible return to negotiations. This is keeping the market within a narrow whippy range as we look toward AUD CPI tomorrow and then the FOMC on Thursday morning. All this with some month-end action to add some spice. 

• {AUDUSD Curncy} - 0.6990, -0.01%
• {NZDUSD Curncy} - 0.5770, -0.07%
• {AUDNZD Curncy} -  1.2117, +0.08%