RBA: VIEW: ANZ Pushes Out First Rate Cut To November 2024

The suspected intervention by Japanese authorities failed to lend durable support to the yen and USD/JPY promptly retraced its sharp downswing from Monday's Tokyo hours. The ~2.8% drop occurred amid light headline flow, after a similar ~3.8% drop last Friday, raising widespread speculation that currency officials likely participated in the market to arrest JPY depreciation.

• Tsy Sec Yellen told reporters that the Japanese government has not recently notified the U.S. of any plans to intervene in FX markets, even as "they did inform us previously of an intervention, which we understood was a concern over volatility." Her comments point to the lack of international coordination in Japan's efforts to defend the yen.
• Reports based on the BoJ's balance of payment figures suggested that the size of the intervention last Friday may have reached Y5.5tn, an all-time high.
• U.S./Japan yield spreads widened at the margin. The gap on 2-year yields grew 2.9bp, while 10-year differential was 2.7bp.
• Positive outturns from benchmark equity indices post-Asia created an unfavourable backdrop for the yen, despite concerns over possible continuation of the COVID-Zero policy in China.
• Spot USD/JPY last seen at Y148.86, little changed on the day. Topside focus falls on Oct 21 high of Y151.95, followed by Jul 1990 high of Y152.30. Bears look for losses towards yesterday's low of 145.56.
• Reminder that the BoJ will announce its monetary policy decision this Friday.

• RES 3: 152.26 - High Dec 7 / 21 2021
• RES 2: 151.13 - High Mar 3
• RES 1: 149.20/150.81 - High Aug 5 / High Aug 5
• PRICE: 147.84 @ 15:36 BST Oct 24
• SUP 1: 147.38 - Low Oct 21
• SUP 2: 147.07 - Low Jun 20
• SUP 3: 145.05 - Low Jun 16 and a key support

JGB futures extended losses into the Friday close, keeping the contract close to recent lows. This signals scope for more downside. The clearance of support at 147.62, the Sep 27 low confirms a resumption of the bear cycle and opens 147.07, the Jun 20 low on the continuation contract. Key resistance for now remains intact at 150.81, the Aug 5 high.

Japan's Economic Revitalisation Minister Daishiro Yamagiwa resigned on Monday and Prime Minister Fumio Kishida will announce the replacement today, local media reported last night.

• Yamagiwa came under criticism over his failure to fully disclose his connections with the Unification Church until the press provided clear evidence, which drew the ire of opposition lawmakers and the general public. Yomiuri reports that the resignation was effectively a dismissal approved during a Cabinet meeting on Monday evening.
• Kishida is aiming to complete the certification ceremony for the new minister as soon as this evening, as reigniting economic momentum remains his priority. Yamagiwa, a member of the Aso faction within the ruling Liberal Democratic Party, was responsible for implementing the Prime Minister's flagship "New Capitalism" agenda.
• Kishida had reportedly been considering sacking Yamagiwa but feared that it might trigger a "domino of resignations," as some other Cabinet members and LDP executives also had connections with the Unification Church. In addition, yielding to external pressure incentivises opposition parties to step up their attacks on the government over its relationship with the religious movement.
• The sacking of Yamagiwa has exposed tensions within the ruling party. Sankei cited LDP sources accusing the Prime Minister of acting too late. Per an Asahi report, Kishida missed a Board meeting on short notice last afternoon, while some lawmakers have been complaining about his poor coordination with parliament. Declining approval ratings are exacerbating the situation, with the Cabinet's score worsening to a record low of 27% in the latest Mainichi survey.