JAPAN DATA: Household Spending Slumps Back Into Negative Territory
Japan Dec real household spending was much weaker than consensus forecasts. We printed at -2.6%y/y, versus the -0.3% forecast and +2.9% prior outcome. In m/m terms, real spending fell by 2.9%. Income was flat y/y, after a -2.2% fall in Nov. The chart below plots real household spending y/y against real labour earnings (also y/y). The fall in spending moves it back more into line with real wage trends, which remain in negative territory (last print for the wages series is Nov, we get the Dec print next Monday). Sustained positive real wages gains remains a key focus point for the government and BoJ (around sustainably achieving its inflation target). Today's outcome is unlikely to add anything to near term BoJ hike expectations. It still suggests a near term wait and see approach.
Fig 1: Real Household Spending Falls, Wages Data Remains Negative
Source: Bloomberg Finance L.P./MNI
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
OIL: Trump Announces Venezuelan Oil Flows To US Driving Prices Down Sharply
US President Trump has announced on Truth Social that Venezuela will ship “between 30 and 50 MILLION barrels of High Quality Sanctioned Oil” to the US. No time frame has been given but earlier reports said that Chevron, who still has operations there, has sent 11 tankers to the country to begin transporting oil to the US. Gulf refineries are geared to refine heavy, sour crude of the type that Venezuela produces. WTI has reacted sharply to the news falling 1.7% to $56.16/bbl after declining on Tuesday as additional global supplies add to a record surplus.
- Without a timeframe it is difficult to understand how Venezuela will be able to send that much oil to the US. The IEA reported that it produced only 860 kbd in November last year down from around 1mbd early in 2025.
- In the 1990s, Venezuela produced over 3mbd. According to the IEA it was the 17th largest oil exporter globally and second in South America in 2023 as sanctions, corruption and a related-lack of investment in the sector drove output down 73% since 2000.
- Given sanctions Venezuela has sold its crude at a discount to benchmarks which drove demand from China, the largest customer. It should receive more for its crude now as Trump also said that the US would buy it at market prices but with the benefit going not just to Venezuela’s people but also those of the US.
- Energy Secretary Wright will “execute the plan” and Chevron, Conocophillips and Exxon are due to meet at the White House on Friday according to the ABC.
- The US has also asked Venezuela to sever ties with Iran, Russia and China.
STIR: Almost 2 x 25bps Hikes Priced For 2026 Ahead Of CPI
Ahead of today’s CPI data, RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 41% for February to 113% by June and 182% by December 2026.
Figure 1: RBA-Dated OIS – Current
Source: Bloomberg Finance LP / MNI
CNH: USD/CNH Consolidates Post Sharp Dec Downtrend, CNY Basket Higher
Spot USD/CNH couldn't sustain sub 6.9800 levels on Tuesday as broader USD index levels recovered as the session unfolded. CNH outperformed higher dollar index levels though, with the currency little net changed for the session. The pair is around 6.9820 in early Wednesday trade, leaving recent ranges intact, although the strong downtrend evident in the pair has flatlined since the start of the year. Spot USD/CNY finished up at 6.9839 on Tuesday, while the CNY CFETS basket tracker climbed further to 98.35, fresh highs since April last year, as yuan outperformance continued.
- For spot USD/CNH, the recent consolidation has brought the RSI (14) back up from recent extremes, albeit still oversold at 26.4. For other technicals, all key EMAs remain in a downtrend, with the 20-day under 7.01. The 50-day is under 7.0500 and would likely need to be challenged to shift bullish CNH sentiment. Recent lows at 6.9664 remain intact.
- Our China policy team noted late yesterday: China should avoid using the yuan’s significant appreciation against the U.S. dollar as a policy tool to rebalance its trade surplus but should instead take measures to boost domestic demand, a prominent Chinese economist and foreign exchange expert told MNI, downplaying prospects for further significant one-way gains in the currency.
- Also note, the PBoC will retain a moderately accommodative stance in 2026, flexibly utilising reserve requirement ratios and interest rate reductions and maintaining ample liquidity to support the economy, according to a statement on its website on Tuesday.
- The local data calendar has FX reserves on tap for Dec, which usually print late in the session.
