JAPAN DATA: Tokyo CPI Below Forecasts On Lower Food & Utility Prices
Japan's Feb Tokyo CPI print came in below expectations. The headline printed at 2.9%y/y, against a 3.2% forecast and prior outcome of 3.4%. Ex fresh food was 2.2%y/y (forecast of 2.3% and 2.5% prior). The ex fresh food, energy measure was 1.9%y/y, unchanged from Jan, but under the 2.0% forecast. The trends of these indices are presented in the chart below.
- In m/m terms headline CPI fell 0.3% (seasonally adjusted), with goods prices down -0.6%, after a 1.2% gain prior. Services rose 0.1%, after a modest fall in Jan. The core ex all food and energy measure also rose 0.2%m/m, offsetting Jan's 0.2% dip. This is not in seasonally adjusted terms though.
- Food prices fell -0.8% m/m (with fresh food down -5.6%), while utilities were off by -4.9%m/m. This owed to government subsidies impacting energy prices.
- Other components were mixed, with household goods and clothing recovering from Jan dips. Entertainment rose 0.5% after falling 1.7%m/m in Jan. Medical care and transport were flat though.
- In y/y terms, most components saw softer y/y outcomes relative to the Jan print. The strongest y/y pace remains food and utilities, education the weakest.
- The softer food print will likely be welcome by the authorities, with BoJ Governor Ueda noting it was a watch point recently. Underlying trends still look favorably for broader inflation (the core-core print was still close to 2%), but today's outcome is unlikely to generate a hawkish market reaction in terms of the BoJ outlook.
Fig 1: Tokyo CPI Y/Y Trends - Feb Momentum Slowed, Aided By Lower Food & Utility Prices
Source: MNI - Market News/Bloomberg
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JGB TECHS: (H5) Trend Needle Points South
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 141.06 @ 16:12 GMT Jan 28
- SUP 1: 140.00 - Round number support
- SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing
A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. For now, short-term gains are considered corrective.
JGBS: Futures Little Changed Overnight, BoJ Minutes Due, FOMC Later Today
In post-Tokyo trade, JGB futures closed slightly weaker, -3 compared to settlement levels, after US tsys finished the NY session little changed ahead of today’s FOMC decision.
- US tsys pared early losses after lower-than-expected Durable Goods Orders and down-revision to prior, while Capital Goods were higher than expected.
- The Conference Board consumer survey saw confidence disappoint in January at 104.1 (cons 105.9) after an upward revised 109.5 (initial 104.7) for its lowest since September. Declines were seen in both main categories, also to their lowest since September, but were most pronounced for the present situation.
- Stocks rebounded, semiconductors outperforming software & hardware makers as markets had more time to contemplate the new competition for US AI developers.
- Moves are underway that would allow Japan’s Government Pension Investment Fund to participate directly in government bond auctions, according to people familiar with the matter. The Ministry of Finance will soon invite public comments and amend a government ordinance that defines participants in JGB auctions. (per BBG)
- Today, the local calendar will see BOJ Minutes of the Dec. Meeting and the Consumer Confidence Index alongside 5-year GX supply.
GOLD: Gold Competes with USD as Tariff Trade Favourite.
- Gold bounced back from Monday’s decline to post a strong day on Tuesday.
- Gold had suffered at the hands of a strong USD but ultimately overnight it’s ‘safe-haven’ status prevailed, rallying to regain most of Monday’s losses.
- Opening at US$2,740.81and doing very little in the morning session, it’s fortunes changed rallying for most of the afternoon to finish at $2,763.31.
- President Trump said Monday evening that he ‘wants to impost across the board tariffs that are much bigger than 2.5%” and that he has in his mind what the number will be to protect the country.
- Gold now turns its attention away from tariffs for a moment as the Federal Reserve meets this week to decide the next move for interest rates.
- The current market consensus is for the Fed to stay on hold at this week’s meeting.
- As gold is not interest baring, a cut in rates is considered good for gold as the cut reduces the cost of financing.
