EM ASIA CREDIT: Greentown China (GRNCH): Profit warning

Japan Dec labour earnings data was weaker than forecast, but positive revisions to Nov, helped offset this headline disappointment. Nominal earnings rose 2.4% y/y, (versus 3.2% forecast), but Nov was revised up to 1.7% versus an initial reported gain of 0.5%. Real earnings were -0.1%y/y against a 0.8% forecast and revised Nov fall of -1.6% (originally reported as -2.8%). Bonus payments rose 2.6%y/y, after a -1.5% fall in Nov, likely helping the headline result. 

• The chart below plots real and nominal cash earnings in y/y terms. The nominal earnings metric remains volatile but holding at firmer averages compared to 2022-2023, but this is merely offsetting stronger inflation outcomes to leave real wages struggling to assert a positive trend. Still, view our policy team - real wages are likely to return to positive territory in coming months as the year-on-year rise in headline CPI slows, partly reflecting government measures.
• On a same sample basis, cash earnings rose 2.0%y/y, versus 3.0% forecast and 1.1% prior (revised up from 0.9%). Scheduled full time pay rose 2.1%y/y (2.2% forecast and 2.2% prior). These metrics are comfortably off cycle highs.     

Fig 1: Nominal & Real Labour Earnings Y/Y 

Source: Bloomberg Finance L.P./MNI 

The AUD/JPY range Friday Night was 108.94 - 110.38, Asia is currently trading around 110.30. The pair bounced powerfully off the 108.00 area as risk did a complete reversal and the market looked toward the weekend elections. A supermajority for the LDP has seen the pair attempt to extend above 110.50 this morning but some official jaw-boning is keeping it in check for now. AUD/JPY is up in rarified air so some prudence is warranted up here, but for now the trend remains strongly up. We have to go back to 1990 for the last time this pair was above 110.00. On the day, first support is back toward the 109.50 -109.90 area and then the 108.00 area. A sustained move above 110-111 and the market will start focusing on the 120-125 area.

• Brad Setser on X: "I would remind anyone thinking of selling the yen b/c of "fiscal" to buy the dollar that they are selling the currency of a CA surplus country with a fiscal deficit in the 3% of GDP range (with Takaichi proposals, maybe 3.5% of GDP I think) for a currency of a CA deficit country with a fiscal deficit of over 5% of GDP that is likely heading back up -- anyone worried about fiscal should sell yen for won, or Swedish krona, or Aussie dollars, not for the US dollar. (p.s. selling yen b/c real rates are negative at the short-end is fine)."
• The AUD/JPY Average True Range(ATR) for the last 10 Trading days: 136 Points

Fig 1: AUD/JPY spot Monthly Chart

Source: MNI - Market News/Bloomberg Finance L.P

USD/JPY has dipped back under 157.00 as headlines from Japan's FX currency chief Mimura have crossed. Session lows rest under 156.70, where we sit close to, while earlier highs, post the strong Takaichi victory, were at 157.76. The comments may have caught the market a little off guard, with perhaps an expectation they would come at higher levels in USD/JPY. Still, Japan officials did state over the weekend that they would talk to the market today if needed (Japan FinMin Katayama). 

• Via BBG, some of the headlines from Mimura: "*MIMURA: WATCHING MARKET MOVES WITH HIGH SENSE OF URGENCY, "*MIMURA: CONSTANTLY COMMUNICATING WITH MARKET'", "*MIMURA: WILL WATCH FOREX AND MARKET MOVES CLOSELY" - BBG