JAPAN DATA: Exports Lag NEA Trends, But Trade Balance Best Since 2021
Japan exports were slightly above forecasts for Dec. Up 2.8%y/y (forecast was 2.4%) but slower than the Nov 3.8% pace. Japan was somewhat lagging other NEA economies in terms of export trends at the end of 2024. Export growth for South Korea through to China was around +6% to +10% y/y (see the chart below, Japan is the red line). On the import side, growth was slightly softer than projections, up 1.8% y/y, (3.2% forecast), but prior was -3.8%.
- The modest downside import surprise helped drive a better trade position. We saw a surplus of ¥130.9bn, versus -¥68.5bn forecast. In seasonally adjustment terms we were still in deficit at -¥33bn, but this was much better than the -¥526bn projection. This is the best trade balance position since 2021.
- On the export side, we dipped in y/y terms for the US (-2.1%) and China (-3.0%), but the EU and exports to Asia more broadly were positive.
Fig 1: Japan Exports Lagged NEA Trends Into End 2024
Source: MNI - Market News/Bloomberg
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STIR: BOJ Dated OIS Slightly Softer Than Pre-Dec MPM
BOJ-dated OIS pricing is marginally softer than pre-Dec MPM levels.
- Nevertheless, pricing remains 3-13bps firmer beyond January versus pre-October MPM levels, with the September/October 2025 contracts showing the strongest gains.
- Market expectations currently indicate: a 37% probability of a 25bp hike in January; a cumulative 95% chance by May; and a full 25bp increase not fully priced in until June 2025.
- A full 25bp hike had been priced by May before the December MPM.
Figure 1: BOJ-Dated OIS – Today Vs. Pre-BOJ MPM (October)
Source: MNI – Market News / Bloomberg
JGB TECHS: (H5) Shallow Correction
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.24 @ 16:29 GMT Dec 23
- SUP 1: 141.88 - 1.618 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed, touching 141.87 on the way lower before rebounding back to flat on the dovish BoJ decision. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.88 and 141.56, Fibonacci projection points on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
JGBS: Futures Weaker Overnight With US Tsys, BOJ Minutes Due
In post-Tokyo trade, JGB futures closed weaker, -9 compared to settlement levels, after a heavy NY session for US tsys. Benchmark yields finished 3-7bps higher, with the 7-year leading.
- Projected US rate cuts into early 2025 were steady to slightly lower vs. yesterday’s open (*) as follows: Jan'25 steady at -2.1bp, Mar'25 -11.7bp (-13.7bp), May'25 -16.0bp (-18.8bp), Jun'25 -23.4bp (-25.3bp).
- Little reaction to a flurry of mixed data: November posted improved home sales figures compared with a soft October, but revised New home sales came in roughly as expected at 664k on a seasonally-adjusted annualized rate, up from 627k prior (upwardly revised from 610k), following on from data showing a 4.8% M/M increase in existing home sales in November to the highest level since March at 4.15M.
- Headline durable goods orders figure of -1.1% M/M, the "miss" vs -0.3% expected was offset by an upward revision to the prior growth reading to 0.8% from 0.3%. Transportation equipment - a typically volatile category - led the decline, falling -2.9% M/M, with nondefense aircraft/parts down 7.0%.
- Today, the local calendar will see BOJ Minutes of Oct. Meeting and Dept Store Sales alongside an Auction for Enhanced-Liquidity 15.5-39 YR.
