JAPAN DATA: CPI Y/Y Momentum Accelerates, But Services Inflation Eases
Japan National wide CPI for Jan was close to expectations. Headline rose at 4.0%y/y, as per market forecast, prior was 3.6%. The core, ex fresh food measure was 3.2%y/y, slightly above consensus of 3.1% (while prior was 3.0%). The core ex fresh food, energy, measure was 2.5%y/y, in line with market forecasts (prior was 2.4%).
- The chart below plots these three inflation measures, which at face value should continue to underpin BoJ confidence in achieving its 2% inflation target sustainably.
- In m/m terms, headline CPI rose 0.5%, ex fresh food 0.4% and ex fresh food and energy 0.3%, which were close to Dec outcomes from last year. Goods prices rose 1.0%, services were flat. In non-seasonally adjusted terms, the ex all food and energy measure fell -0.1%m/m. The measure edged down to 1.5%y/y, from 1.6% prior.
- By sub sector, food inflation remained strong. Up 1.8% m/m and 7.1% for fresh food. Whilst this segment can be volatile, BoJ Governor Ueda has noted the risk such price trends impact broader consumer inflation expectations.
- Other positives were household goods, up 0.4%m/m, and transport 1.0%. Drags came from entertainment, -1.1%m/m and clothing, footwear, off -1.7%m/m. In y/y terms, food, particularly fresh food and utilities were still very strong in y/y terms.
- Services prices rose 1.4% y/y, from 1.6% in Dec.
- Overall, some of the detail is arguably not as hawkish as the headline, core results suggest. This may see the market not add any further to BoJ tightening expectations/pricing, although equally we may not retrace much either. Note next Friday we get Tokyo Feb CPI.
Fig 1: Japan Nationwide CPI Y/Y Trends
Source: MNI - Market News/Bloomberg
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JGB TECHS: (H5) Trend Needle Points South
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 141.15 @ 15:56 GMT Jan 21
- SUP 1: 140.00 - Round number support
- SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing
A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. For now, short-term gains are considered corrective.
JGBS: Futures Uptick Overnight With US Tsys, Light Local Calendar
In post-Tokyo trade, JGB futures have upticked, +2 compared to settlement levels, after the US Treasury curve bull-flattened following Monday’s holiday, as market focus remained on Trump administration policies post-inauguration. US yields ended 1-5bps lower.
- Offshore data was limited: the January Philly Fed non-manufacturing survey was soft, and Canadian CPI came in below expectations.
- With 2025 Fed rate cut expectations fairly static (and the FOMC is in its pre-January meeting blackout period), the US tsys short end remained anchored.
- Wednesday's US data calendar remains light, with MBA mortgage data and the December Leading Index - more focus will be on $13B 20Y Bond reopening auction, as well as a Fox interview with Pres Trump airing after Wednesday's cash close.
- Today, the local calendar will see BoJ Rinban Operations covering 1-25-year JGBs.
- BoJ Policy Decision is on Friday, with a 25bp hike expected. A hike will put the BoJ's key rate at 0.5%, its highest level since 2008.
NEW ZEALAND: RBNZ’s Core Measure Likely To Moderate From Q3’s 3.4%
Q4 headline inflation was significantly impacted by some volatile components thus making underlying measures important to gauge the trend. The RBNZ releases its sector factor model estimates today at 1500 NZDT (1300 AEDT) and core is likely to moderate further towards the target band from its Q3 reading of 3.4% y/y. Non-tradeables inflation has a 77% correlation with the RBNZ’s core measure and the two have moved very closely since 2021. The former remained elevated but moderated 0.4pp to 4.5% y/y in Q4, lowest since Q3 2021, signalling a further easing in underlying inflation when the RBNZ data is released.
NZ CPI y/y%
