MACRO ANALYSIS: VAT Plans Raise Focus on Japanese Fiscal
Feb-13 15:08
Executive Summary:
- Financing the JPY5trn food consumption tax suspension with proceeds from the FX special account would likely open up gaps in the general budget
- This leaves the Japanese finance ministry with three options: Plug the gap through increasing the efficiency of the tax base and expenditure, net liquidation of parts of the FX special account, or higher JGB issuance through the backdoor
- Which one of these options it chooses may have substantial consequences for JPY as well as JGB yields. Special account partial liquidation would be a notable JPY positive
- If Japan wants to adhere to its new fiscal rules, its headroom has an upper limit of roughly 8ppts of GDP through 2030 cumulatively
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US: No IEEPA Tariffs Ruling Yet, SCOTUS Developments in Focus
Jan-14 15:07
Supreme Court's first opinion of the day is "Barrett vs United States", ie not tariffs, Scotusblog reports.
- Because there are likely so many Supreme Court opinions (possibly 3-4) out today, and not in any particular order as far as we know, we will only know what the other ones are as they come out, so stay tuned.
- The time frame today depends on how many opinions, and how long the opinions are as the justices read out the summaries. Could be very short (all done in next 15 minutes), or an hour or longer. it's unknown.
INTERNATIONAL TRADE: /EQUITIES: Asian AI-Related Goods Exports Robust In Dec25
Jan-14 15:06
China, Taiwan and South Korea’s December trade data suggests demand for AI-related goods remained robust to end 2025. Selected sub-components for which timely data is available point to an acceleration of South Korean and Chinese exports in Q4, while Taiwanese exports of various integrated circuit products (largely attributable to TSMC) have been robust throughout the year.
- Annual growth rates aren’t at historic highs for any of the three exporters, but 48% Y/Y (China), 43% (South Korea) and 33% (Taiwan) rates nonetheless underscore the demand for AI investment inputs seen through last year.
- A key focus this year will be on the sustainability of AI and AI-adjacent companies' valuations, with increasing scrutiny on the profitability of substantial capex investments.
- In this light, Magnificent Seven earnings will be in focus towards the end of this month. See here for MNI’s full earnings schedule
- For now though, confidence in the AI theme persists. Earlier this week, Alphabet surpassed a $4trln market cap on news of a multi-year AI technology deal with Apple.
MNI: US OCT BUSINESS INVENTORIES +0.3%; SALES -0.2%
Jan-14 15:00
- MNI: US OCT BUSINESS INVENTORIES +0.3%; SALES -0.2%
- US OCT RETAIL INVENTORIES +0.6%
