US TSYS: Cheaper Start

Most analysts (42/43 covered by the BBG survey) expect no change in Bank of Japan policy settings later today (albeit with varying degrees of conviction).

• Citi are the exception, with their base case looking for an outright abandonment of Yield Curve Control.
• They point to "the distortion of the yield curve and the need to fundamentally address it, as well as the relatively lower impact of abolishing YCC under Kuroda vs the next governor."
• Citi sees 10-Year JGB yields moving to 1.00% on that surprise, with 7s10s or 5s10s steepeners also having potential as the end of YCC may be accompanied by a strengthening of QE and NIRP.
• On the FX side, Citi suggest that the abandonment of YCC has not been fully priced in, pointing to a likely leg lower in USD/JPY should we see this happen. Their global macro strategy team suggests that Y125 or lower is by “no means far-fetched” in this instance. Meanwhile, their FX strategist suggests that Y122-123 may be a good zone to establish short-term long positions, if USD/JPY gets there.
• They also note that more dovish policy tweaks will likely pull USD/JPY higher in the short-term, although fundamentals will continue to point to medium-term JPY strength. In this instance, their FX strategist thinks that Y130-135 would be a good zone to establish core USD/JPY short positions.

XPERT HR MEDIAN PAY AWARD 3M DEC +5.0%; Nov +5.0%

XpertHR's latest pay data found pay awards were up +5.0% in the three months ending December. This is over double last year's December figure as firms experience growing pressure from a tight labour market and the higher cost of living.

• The +5.0% 3m/yoy uptick was again a 31-year high, equalling that of November, implying that earnings could have held pace in December national labour data (due Feb 14).
• Data published by the ONS on Tuesday showed total average weekly earnings surprised to the upside, rising +6.4% 3m/yoy, up from +6.1% and a near-record level.
• This data alongside continued prevalence of wage disputes adds to evidence of further wage inflation into Q1 2023. Yet initial signs of easing labour markets are also becoming apparent (see here). The BOE's December monetary policy minutes highlighted that the Bank sees both upside and downside risks to wages over the coming months.

• MNI: UK OCT-DEC MEDIAN PAY AWARDS +5% :XpertHR