JAPAN DATA: Labour Earnings Still Negative, But Unlikely To Shift BoJ Thinking
Japan Sep labor cash earnings were close to market forecasts. Headline earnings rose 1.9%y/y, in line with market forecasts, while real earnings were -1.4%y/y (against a -1.5% forecast). Aug revisions meant we were coming from a lower base though, Real earnings were -1.7%y/y for Aug (originally reported as -1.4%), while nominal earnings were 1.3%y/y (originally reported as 1.5%). Real earnings have now been in negative territory for the whole of 2025 (in y/y terms). It's unlikely to shift BOJ thinking though. All eyes are on Ueda's speech on Dec 1 for Dec versus Jan hike risks. The central bank is also likely to rely on liaison around wage increases being negotiated and company reports, while the Q4 Tankan survey will also be watched closely.
- The chart below overlays real labour earnings and real household spending. Note we get the Sep update for household spending tomorrow. In recent months household spending trends have been firmer than real labour earning outcomes.
- Ueda stated at the last BoJ meeting that it was still too early to judge the extent of wage hikes in fiscal 2026, though it seems that these would only be slightly higher or lower than last year’s.
- Helping the headline results in Sep were a rebound in bonus payments, which tend to be volatile. They were up 4.5%y/y, after a -7.8%y/y outcome in August.
- Same sample base earnings in y/y terms were up 2.4% for cash, versus 1.9% prior. Scheduled pay rose 2.2%y/y, versus 2.4% in Aug. These trends are mostly positive, but we sit comfortably off 2024 highs.
Fig 1: Japan Real Labor Earnings & Household Spending Y/Y
Source: Bloomberg Finance L.P./MNI
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US: Trump Comments Suggest Willingness To Negotiate With Democrats
US President Trump has posted via Truth Social, laying blame for the US government shutdown on the Democrats. This post came shortly after the Senate failed to pass a funding bill, leaving the government in shut down. Trump notes that he is willing to work/negotiate with the Democrats around healthcare policies, but first the Democrat's must re-open the government. Earlier remarks from Democrats House Minority Leader Jefferies indicated that the White House had been radio silent since last Monday, indicating little progress in ending the shutdown. Still, earlier remarks from the US President and Democrats Senate Leader Schumer pointed to a willingness to talk/negotiate (via the WSJ).
- Trump Post via Truth Social: "Democrats have SHUT DOWN the United States Government right in the midst of one of the most successful Economies, including a Record Stock Market, that our Country has ever had. This has sadly affected so many programs, services, and other elements of Society that Americans rely on — And it should not have happened. I am happy to work with the Democrats on their Failed Healthcare Policies, or anything else, but first they must allow our Government to re-open. In fact, they should open our Government tonight!"
- "We have a negotiation going on right now with the Democrats that could lead to very good things," Trump told reporters in the Oval Office on Monday. Senate Minority Leader Chuck Schumer (D., N.Y.) said formal talks hadn't commenced. "Trump's claim isn't true. But if he's finally ready to work with Democrats, we'll be at the table," he said in a statement. (via the WSJ).
JGB TECHS: (Z5) Bearish Trend Sequence Intact
- RES 3: 140.08 High Jun 13
- RES 2: 139.05 High Aug 4
- RES 1: 137.30 - High Sep 8 and key short-term resistance
- PRICE: 135.69 @ 16:25 BST Oct 06
- SUP 1: 135.67 - Low Sep 26
- SUP 2: 135.39 - 1.618 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
- SUP 3: 134.69 - 2.000 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
A bear threat in JGB futures remains present despite the intraday spike Monday. The contract pulled well off the intraday high, keeping the bias negative for now. The latest sell-off has also resulted in a break of support at 136.19, the Sep 4 low and a bear trigger. Clearance of this level confirms a resumption of the downtrend and opens 135.39 next, a Fibonacci projection. Key short-term resistance has been defined at 137.30, the Sep 8 high.
JGBS: Futures Little Changed Overnight, 30Y Supply Today
In post-Tokyo trade, JGB futures closed little changed, +1 compared to settlement levels.
- US tsys traded heavily as fiscal policy concerns resurfaced again, this time from overseas. In Japan, the LDP elected Sanae Takaichi as its leader. She supports "Abenomics" and fiscal stimulus. In France, PM Lecornu abruptly resigned, adding to concerns over another crisis in the government and increasing doubt on bringing the deficit under control.
- MNI BRIEF: BOJ: Mixed Wages, Prices May Cloud Rate Hike. The Bank of Japan reported mixed views on wage hikes for fiscal 2026 and on corporate price-setting behaviour, key areas of focus for policymakers. The findings are likely to overshadow prospects for a rate hike this month, although market expectations for an October move have weakened following the outcome of the ruling Liberal Democratic Party's presidential election.
- "Deutsche Bank turns Neutral On Yen From Bullish On Takaichi Win: "Sanae Takaichi's victory in the LDP leadership race is a big surprise for markets. Our base case is for knee-jerk losses in the JPY towards 150, but we do not see the JPY trending much weaker." – BBG.
- Today, the local calendar will see Household Spending and Leading/Coincident Index data alongside 30-year supply.
