JAPAN DATA: Tokyo CPI Above Forecasts, Positive Signs For Services Inflation
Tokyo April CPI came in stronger across the board relative to market expectations. Headline printed 3.5%y/y versus 3.3% forecast and 2.9% prior. The ex fresh food measure was 3.4%y/y, (3.2% was forecast and prior 2.4%), while the ex fresh food, energy measure rose to 3.1%y/y (forecasts were at 2.8%, prior 2.2%).
- Base effects looked to have played a role in terms of the y/y bounce, given April prints last year were sub 2%y/y across all of these measures. Still, it does signal further progress in terms of moving towards achieving the 2% inflation target sustainably, see the chart below
- The m/m outcomes for April were all at the same pace as March or firmer, except for goods, which rose just 0.1%. Services though rose 0.3%m/m in seasonally adjusted terms for the second straight month.
- The measure which excludes all food and energy prices rose 0.7%m/m (non-seasonally adjusted) and is back to 2% in y/y terms, from 1.1% in March.
- Looking at the break down by sub-category, food fell 0.4%m/m (led by fresh food down 5.9%), while medical care eased -0.1%m/m. All other sub-categories were positive in the month. Utilities rose 3.3%m/m, entertainment up 1.7% and education 1.4%. Household goods were +1.5% as well.
- Some of these strong m/m gains (education and utilities etc) may not be repeated, but the underlying trends still appear positive across most sub-categories.
- Next week the BoJ meets, with little changed expected, but today's reading should still add to further tightening expectations for this year (particularly signs of further services related inflation). BoJ Governor Ueda hinted as much in earlier remarks, although tariff uncertainty continues to leave a cloud over the outlook.
Fig 1: Tokyo CPI Bounces Strongly In April
Source: MNI - Market News/Bloomberg
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MNI: JAPAN FEB SERVICES PPI +3.0% Y/Y; JAN REV +3.2%
- MNI: JAPAN FEB SERVICES PPI +3.0% Y/Y; JAN REV +3.2%
- JAPAN FEB SERVICES PPI +0.0% M/M: JAN UNREV -0.5%
AUSSIE BONDS: Dec-34 Supply Faces Similar Yield But Steeper Curve
Bidding at today’s A$800mn of the 3.50% 21 December 2034 bond, issue #TB168, is likely to be shaped by several key factors:
- The current outright yield is similar to the previous auction and approximately 25bps lower than the peak in late 2024. The line was last sold on 12 March 2025 for A$800bn.
- The 3/10 yield curve has steepened slightly since the last auction and is at its steepest level since December 2021.
- Demand for duration should be supported by the improvement in sentiment toward longer-dated global bonds, which has strengthened since mid-January despite some deterioration over recent weeks.
- The line is included in the XM basket.
- While some factors may limit the overall strength of bidding, there is an expectation of continued firm pricing at today's auction.
- Results are due at 0000 GMT / 1100 AEST.
CNH: Holding Close To 50-day EMA, China Equity Outperformance Softens
USD/CNH found selling resistance above 7.2700 late in Asia Pac trade on Tuesday. We pulled back towards 7.2600, but sit slightly higher in early Wednesday dealings, last near 7.2660. We were little changed in aggregate for Tuesday's session. Spot USD/CNY finished up at 7.2584. The CNY CFETS basket tracker was up slightly for Tuesday's session, last at 98.93 (per BBG).
- For USD/CNH technicals, current levels are very close to the 50-day EMA (7.2650). A clean break above 7.2700 could see the low 7.3000 region targeted, which was seen in early March. The 200-day EMA is back close to 7.2400.
- CNH didn't benefit much from weaker US data outcomes/lower US yields. Yen was the second best performer in the G10 space. CNH/JPY sits lower at 20.64, against recent highs near 20.78. We remain in an uptrend for this pair though from earlier March lows.
- In the equity space, the Golden Dragon index lost 1.22% in Tuesday US trade, down for the 6th straight session. Onshore markets were close to flat yesterday, while Hong Kong underperformed, as Alibaba raised bubble fears around data center buildouts.
- The chart below plots USD/CNH (inverted) against the China to global equity market ratio, which has come off recent highs, providing less impetus to CNH.
- The local data calendar is empty until tomorrow's Feb industrial profits print.
Fig 1: USD/CNH (Inverted) & China To Global Equity Ratio
Source: MNI - Market News/Bloomberg
