JAPAN DATA: Current A/C Surplus Surges On Income Inflows, But May Not Aid Yen
Japan Sep trade and current account balance data were stronger than forecast, particularly on the current account side. In unadjusted terms we printed ¥4483.3bn, versus ¥2456.6bn projected and ¥3701.4bn prior. In seasonally adjust terms we were at ¥4347.6bn for the current account, close to double the consensus projection and prior outcome. This is the best outcome for at least a few decades. This isn't necessarily a yen positive though, at least based off recent correlations. Current account shifts haven't coincided with yen shifts in recent years.
- The trade balance on a BoP basis aided the current account improvement. We were up to a surplus of ¥236bn, versus a projected deficit of -¥100.1bn. The trade balance remains within recent ranges. The Citi terms of trade proxy for Japan is pointing to positive trade balance outcomes continuing in the near term.
- The bigger driver for the current account improvement though was the surge in the primary income balance, ¥4728.1bn, versus ¥2968.4bn in Aug. These outcomes are usually fairly steady, but point to a pick in net income earned from Japan's offshore investments.
- The chart below plots USD/JPY, which is inverted on the chart (the orange line) against the current account position (the white line). It shows the lack of relationship between the two series, with much of the surplus in Japan potentially re-exported offshore via capital outflows.
- This may benefit the yen at some point, particularly if we see the US authorities (especially Tsy Secretary Bessent) making noises about yen being undervalued relative to Japan's external balances.
- However, this is likely to play out over the medium term rather than in the near term. Short term dynamics around the BoJ/Fed outlooks, which will drive US-JP yield differentials, along with broader risk trends, are likely to remain more important USD/JPY drivers.
Fig 1: Japan Current Account & USD/JPY (Inverted) Trends
Source: Bloomberg Finance L.P./MNI
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US: Trump Oval Office Announcement Underway Shortly
US President Donald Trump is shortly due to deliver an announcement in the White House Oval Office. LIVESTREAM The announcement is expected to relate to drug pricing and could follow a similar template to a recent pledge from Pfizer.
- The announcement will be Trump's first press remarks since a market-moving Truth Social statement earlier today in which Trump suggested calling off a meeting with Chinese President Xi Jinping and raising tariffs on China in response to new export controls from Beijing on rare earths. See earlier bullets here and here.
RATINGS: Moody's Completes Periodic Review Of Belgium, No Rating Action
No ratings actions for Belgium from Moody's, which is quoted in a press release on Bloomberg: "Moody's Ratings (Moody's) has completed a periodic review of the ratings of Belgium and other ratings that are associated with this issuer. The review was conducted through a rating committee held on 2 October 2025 in which we reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), and recent developments. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future."
- There had been some speculation there could be a ratings action - MNI wrote Thursday: "* Moody's on Belgium (Current rating Aa3, Outlook Negative): We expect Moody's to maintain their current stance in the absence of 2026 budget details."
MACRO ANALYSIS: US Macro Week Ahead: No CPI, But Plenty Of Pre-Blackout FedSpeak
Below is the week’s data schedule, with MNI’s annotation of whether or not data will be postponed.
- As we went to press, the Fed announced that next week's Industrial Production data will be postponed (was due to be published next Friday Oct 17) as the data “incorporate a range of data from other government agencies, the publication of which has been delayed as a result of the federal government shutdown.”
- We won’t be getting September CPI as scheduled on Oct 15, but at least the BLS announced it will publish the data on Oct 24.
- As such next week we’ll be looking at some under-covered data points, including the Redbook weekly and Chicago Fed’s CARTS retail sales data (in lieu of the Census Bureau retail sales report), with a little more focus than usual on regional Fed manufacturing indices (NY, Philadelphia).
- Once again, the dearth of tier-one data leaves Fed commentary in focus ahead of the pre-FOMC blackout period: highlights for us are Philadelphia Fed President Paulson making her first comments on monetary policy on Monday since being appointed in the summer, while as always Chair Powell bears watching on Tuesday (we also hear from Bowman, Waller, Collins, Miran, Schmid, and Musalem).
- Additionally we get the latest Beige Book which was already key given the FOMC was already increasingly focused on anecdotal information as it attempts to navigate murky economic waters.
