JAPAN DATA: Firmer Earnings Data, Real Wages Remain Negative Y/Y Though
Japan labor earnings data was better than market forecasts. Nominal cash earnings rose 3.0%y/y, against a 2.7% forecast. The prior was revised down to 2.2% from 2.6% initially reported. In real terms, earnings were still negative at -0.3%y/y, but this was also better than the -0.6% forecast. Revisions saw the flat Oct outcome revised to a -0.4% fall.
- For the same sample base figures, cash earnings rose 3.5%y/y, against a 2.8% forecast (which was also the prior outcome). Cash earnings are off cycle highs (above 5%y/y) but remain very elevated by historical standards. Scheduled full time pay rose 2.8%y/y, in line with expectations, but slightly off Oct's 2.9% pace. Still this metric remains close to 2024 cycle highs.
- In terms of the detail, bonus payments rebounded 7.9%y/y (from -2.2% in Oct), which helped the headline earnings result. Hours worked were -0.2%y/y, but we are up from recent lows of -2.7%.
- The chart below plots real wages against real household spending. The trend is positive for real wages, albeit still negative in y/y terms and from a low base. The authorities will want to see this trend continue and spill over into positive real spending trends as we progress through 2025.
- From a BoJ standpoint, the positive surprise today will be encouraging, but may not be strong enough to shift near term rate hike thinking.
Fig 1: Japan Real Wages & Real Household Spending Y/Y
Source: MNI - Market News/Bloomberg
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RBA: Forecasters Divided Between Q1 & Q2 2025 Start To Easing Cycle
In the November Bloomberg survey, the median response expected the first 25bp rate cut in Q1 2025. February 18 is the only meeting in Q1. Another 25bp is forecast in Q2 and by the end of the year. The market has almost fully priced in the April 1 meeting. Some analysts have pushed out their expectations from February to May since the November minutes said that more than one good quarterly inflation read would be needed to be “confident” that lower headline is having a “more pervasive effect”. The RBA is widely forecast to leave rates unchanged today and we expect its guidance to be little changed (see MNI RBA Preview). The next Bloomberg survey is released on December 18.
Australia rate expectations bp
Source: MNI - Market News/Bloomberg
JGB TECHS: (Z4) Recovers Off New Lows
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 146.53 - High Aug 6
- PRICE: 143.10 @ 16:09 GMT Dec 09
- SUP 1: 142.51 - Low Nov 22
- SUP 2: 142.23 - Low Jul 02
- SUP 3: 140.21 - 1.236 proj of Mar 22 - Nov 1 ‘23 - Jan 15 price swing
Prices fell again late last week, extending the recent pullback. Recent weakness has culminated in a break of 143.57, marking both the Jul 17 high on the continuation contract as well as the Oct 22 low. For now, the 50-dma tops out at 144.19, and marks first resistance. Any recovery would open 146.53, the Aug 6 high (cont) and a bull trigger.
JGBS: Futures Cheaper Overnight With US Tsys, 5Y Supply Due
In post-Tokyo trade, JGB futures are weaker, -16 compared to settlement levels, after US tsys finished Monday’s session with yields 2-5bps higher and the curve steeper. However, trading was very quiet to start the week, with a risk-off tone prevailing. Wall Street closed with small losses after profit-taking ahead of Wednesday's CPI report. PPI inflation data is on Thursday.
- Upcoming supply, including $119bn in Treasury auctions this week and a rash of corporate issuance, weighed.
- Geopolitics, along with various supply and demand considerations helped boost oil and gold, even as the dollar rose.
- The Bank of Japan is taking an unusual step that signals its efforts to improve communications, in a move that may increase market expectations for a rate hike next month. (per BBG)
- The central bank’s Deputy Governor Ryozo Himino will be giving a speech to local business leaders in Yokohama followed by a press conference on Jan. 14, the BOJ said Monday. The move is unusual, as board members haven’t held this kind of event before the first policy meeting of the year at least since former Governor Haruhiko Kuroda began his term in 2013.
- Today, the local calendar will see M2 & M3 Money Stock and Machine Tool Orders data alongside 5-year supply.
