JAPAN DATA: 2025 Pay Agreements Emerging, Some Below Union Demand Levels

The focus this week ahead of the February 19 RBNZ decision is likely to be January monthly prices, as they are higher frequency than their quarterly counterpart, and Q1 inflation expectations,.

• On Thursday, RBNZ inflation expectations for Q1 published. They have been trending lower over the last two years and are around the mid-point of the central bank’s 1-3% band. Both the 1- and 2-year measures were 2.1% for Q4.
• Thursday also sees January total and retail card spending. The RBNZ had eased monetary policy 125bp since August and the effects of this can be tentatively seen in monthly expenditure data as retail card spending rose 2.0% m/m in December to be up 0.6% y/y after a trough in June of -4.4% y/y.
• January food prices are out on Friday along with monthly rents, alcohol & tobacco, petrol, air transport and accommodation services. The components released account for around 45% of the CPI and will be the first indication of how Q1 inflation is developing (Q1 CPI released April 17).
• BusinessNZ’s manufacturing PMI for January prints on Friday. It has been sitting below the breakeven 50-level since February 2023 and was at 45.9 in December. The services version is released next Monday.
• Net migration for December is also published on Friday. Inward flows have been slowing and in November were 2070, although this number is likely to be revised significantly. 

At the Tokyo lunch break, JGB futures are weaker, -9 compared to the settlement levels.

• According to MNI’s technicals team, 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.
• Outside of the previously outlined Current Account Balance and bank Lending data, there hasn't been much by way of domestic drivers to flag.
• Cash US tsys are ~1bp richer in today’s Asia-Pac session after Friday’s heavy post-payrolls session. Headlines have crossed from Bloomberg, with US President Trump stating that the US will announce tariffs of 25% on all steel and aluminium imports from Monday. Trump didn't announce a time when these tariffs will take effect.
• Cash JGBs are flat to 2bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 2.2bps higher at 1.324%, a fresh cycle high.
• Swap rates are flat to 1bp higher. Swap spreads are tighter.

BoJ-dated OIS pricing continues to firm in February, with rates rising 1–4bps today, led by the October contract.  

• Recent economic data from Japan, including stronger-than-expected wage growth and household spending, has fueled speculation that the BoJ may accelerate and extend its rate hikes beyond prior market expectations.
• Markets currently assign a 2% probability to a 25bp hike in March, a cumulative 51% chance by June, and now fully price in a 25bp increase by September—a shift from late January when a hike wasn’t fully priced in until October.

Figure 1: BoJ-Dated OIS – Today Vs. Friday 31 January

Source: MNI – Market News / Bloomberg