Ahead of the much-awaited BoJ statement today we had inflation data from Japan for August. Once again the levels of underlying inflation are at high levels (for Japan):

  • the ‘core’ rate, that excluding fresh food, came in at 3.1% vs. the 3.0% expected and above the Bank of Japan target of 2% for the 17th month in a row. The Bank of Japan keep telling us that such high levels are transitory. I’m not a Japanese household facing rising living costs but if I were I’d be considering heading down to BOJ HQ with a few mates and pitchforks. 17 months is not transitory.
  • You think that's high, the ‘core-core’ level, which strips away the effect of both volatile fresh food and fuel prices and is the closest to the US measure of core inflation) came in at 4.3%. Maybe I’d take two pitchforks.

USD/JPY didn't do a lot in response, edging up ever so slightly just under 147.60. A bigger move came later when US yields held steadily higher. The 10-year hit 4.5%, its highest since 2007. You’ll remember 2007. Global Financial Crisis and all that …

JGB yields ticked lower ahead of the BoJ.

The USD rose a little also against the EUR and GBP. AUD, NZD, and CAD held steady to higher against the big dollar (as I update).

Other data today included flash PMIs from Australia and Japan, and trade balance data from New Zealand (see bullets above).

European Central Bank chief economist Lane gave a speech during the session, flagging that the transmission of ECB monetary policy to broader financing conditions and the real economy is firmly taking hold. If he is right it takes pressure off for still higher rates, at the margin.

The Australian LNG strike has been resolved. Unions and Chevron have reached agreement and industrial action will be halted.

The Yuan gained some ground on talk that some Chinese banks sold US dollars again. USD/CNH fell from highs circa 7.3160 to under 7.2970 as I post.

If you are reading this ahead of the Bank of Japan statement, previews are here:

Asian equity markets mixed after the rout on Wall Street on Thursday:

  • Japan’s Nikkei 225 -0.7%

  • China’s Shanghai Composite +0.4%

  • Hong Kong’s Hang Seng +0.7%

  • South Korea’s KOSPI -0.3%

  • Australia’s S&P/ASX 200 -0.8%

USD/JPY heading towards the BOJ:

usdyen asia wrap chart 22 September 2023