[ROLLING HEADLINE] RECAP OF RECENT JAPANESE HEADLINES AHEAD OF 19TH MARCH BOJ MEETING

BOJ EXPECTATIONS

REUTERS SURVEY [MAR 15]: Poll shows 35% of economists expect the BoJ to end negative rates in March and 62% think April, while 31% of economists expect the BoJ to end YCC in March and 62% say April. 

BLOOMBERG SURVEY [MAR 11]: 38% out of 50 economists see a move hike in March (vs 8% in prior poll). 90% see a risk of an imminent hike. 

MARKET PRICING

[18th March 06:00GMT] Hold: 56%, Hike (10bps): 44%

[15th March 07:15GMT] Hold: 58.3%, Hike (10bps): 41.7% (after RENGO results)

[15th March 06:30GMT] Hold: 58.3%, Hike (10bps): 41.7%

[14th March 13:30GMT] Hold: 59.9%, Hike (10bps): 40.1%

[13th March 09:20GMT] Hold: 55.7%, Hike (10bps): 44.2%

[13th March 06:50GMT] Hold: 53.5%, Hike (10bps): 46.5%

[12th March 06:30GMT] Hold: 52.7%, Hike (10bps): 47.2%

BOJ SOURCES/REPORTS

[18th March] BoJ set to end yield curve control, ETF purchases, and end NIRP on Tuesday. - via Nikkei 

[18th March] BoJ announced it is to conduct an unscheduled bond buying operation offering to buy JPY 3tln of JGBs in an agreement starting on Tuesday and ending on Thursday.  

[15th March]: BoJ is expected to end its negative interest rates when its policy board meets on Monday and Tuesday, Nikkei has learned  Sees a chance to normalize its monetary policy now that inflation appears set to remain at 2% or higher as big corporations and their labour unions agreed on substantial wage hikes this year. - via Nikkei

[15th March]: BoJ is reportedly making final arrangements to end negative interest rates at next week's meeting. - via JiJi

[14th March]: BoJ is reportedly arranging to end NIRP at the March gathering, via JiJi; the final decision will be made after confirming the results of the first round of responses, which the federation will announce on the 15th. - JiJi

[13th March]: The Bank of Japan will discuss whether to end its negative interest rate policy at a meeting that starts Monday, as pay hikes by major companies bring the central bank's 2% price stability target within reach, according to Nikkei. "With more BOJ policymakers embracing the idea, the decision is seen coming down to the results of Japan's annual wage negotiations, to be published by top labour confederation Rengo on Friday." - Nikkei

[13th March]: Early signs of a strong outcome in this year's annual wage talks have heightened chances the BoJ will end its negative interest rate policy next week, according to Reuters sources; "There seems to be enough factors that justify a March policy shift" - Reuters

[13th March] BoJ is reportedly to mull ending all ETF purchases if price goal is in sight; likely to keep buying bonds to keep market stable and to intervene in the event of sharp yield upside, according to Bloomberg sources. - Via Bloomberg

[12th March] BoJ will likely offer numerical guidance on how much government bonds it will buy upon ending NIRP and YCC to avoid causing market disruptions, according to Reuters sources. BoJ is likely to roughly maintain the current pace of bond buying after ditching YCC, and forgot shar cuts in the amount for the time being. BoJ is likely to forgo offering explicit guidance on how soon it will hike rates again amid uncertainties in the economic outlook. Any guidance on future policy path is likely to be in line with Ueda comments on maintaining accommodative monetary conditions even after ending negative interest rates - Via Reuters

[12 March] BoJ is reportedly mulling a March hike with the outcome too close to call, according to Bloomberg sources; officials currently split between March or April  Final decision to be taken after the first wage talk tally on March 15th - Via Bloomberg

[8th March] BoJ leaning towards ending negative rates in March and key determinant will be outcome of March 13 wage talks. A growing number of BoJ policymakers are warming to the idea of ending negative rates.  Upon pulling short-term rates out of negative territory, the BoJ is likely to ditch its 10-year bond yield target - via Reuters. 

[8th March] BoJ considers new quantitative monetary policy framework, via JiJi; would show the outlook of JGB buying amount. BoJ is to reportedly review Yield Curve Control as it considers new quantitative policy framework. BoJ is reportedly mulling buying nearly 6tln of JGBs under new quantitative policy framework - according to JiJi.

[6th March] BoJ is said to have differing views among members the timing of a rate move; officials are said to get more confidence on about stronger wage growth, according to Bloomberg sources. No consensus yet on whether the central bank should move at the end of its policy meeting on March 19th or wait until April. BoJ sees pay increases outpacing last year’s gains, sources said. BoJ is likely to mull tweaking its assessment of consumer spending and production to reflect some weakness; seen keeping its overall view for a gradual economic recovery unchanged, sources added. Wording could be added to reflect fragility in the economy. BoJ will reportedly will reach its policy decision after economic data and financial markets "until the last minute". – Via Bloomberg.

[6th March] At the March BoJ policy meeting some attendees are reportedly likely to say that lifting negative interest rates is reasonable, via JiJi. At least one of the nine members of the BoJ committee argues that lifting negative rates is appropriate, in reference to the March meeting. If no majority (5 or more), then "the policy change will not be made until April or later." – Via Jiji.

[6th March] BoJ is likely to maintain its forecast that the economy will continue to recover and is expected to revise down assessment on consumption and output at the March meeting, according to sources cited by Reuters. – Via Reuters

BOJ COMMENTARY

[13th March] Governor Ueda:

• BoJ will consider tweaking negative rates, YCC, and other monetary easing tools if the sustained achievement of price target comes into sight  We must scrutinize whether positive wage-inflation cycle merges in deciding whether conditions for phasing out stimulus are falling into place.


• This year's wage talks is critical in deciding timing on exit from stimulus.


• Unions have demanded higher pay, seeing many corporate management making offers that will stream in today and beyond.


• Will scrutinize the wage talk outcomes, as well as other data and information from hearings when making policy decisions.

[12th March] Governor Ueda:

• Japan's economy is recovering moderately but some weak data are seen, adds sees weakness in consumption of non-durable goods and need to see if a virtuous cycle is underway.


• Consumption is improving moderately on easing cost-push pressure, with hopes for higher wages.


• Some firms appear to be delaying investment, although capital expenditure plans remain firm.


• We have seen various data since January and more will come out this week and will look at these comprehensively in reaching an appropriate monetary policy decision.


• We are focusing on whether a positive wage-inflation cycle is kicking off, in judging whether sustained, stable achievement of our price target is coming into sight.


• When achievement of 2% inflation stably, sustainably in sight, we will seek exit from negative rates, YCC and other large scale monetary easing steps.


• In what order we phase out various monetary easing tools will depend on economic, price, financial conditions at the time.


• It is possible to control short-term rates at appropriate level by paying interest on reserves parked with BoJ.


• If inflation accelerates and warrants monetary tightening, it is possible to do so by raising rates without scaling back BoJ's bond holdings.


• There are various ways to push short-term rates to positive territory.


• One way would be to apply positive interest to reserves parked with BoJ, which would push up overnight call rate slightly below that level.

[7th March] Governor Ueda:

• Fully possible to seek exit from stimulus while striving to achieve 2% target, and will mull adjusting easing if BoJ can achieve price target and chance of reaching target is gradually rising. Ueda says the extent of rate hikes will be determined by the situation at the time in case negative rates are lifted.


• Will consider rolling back massive stimulus programme once positive cycle of wages and inflation is confirmed.


• “Regardless of whether we abandon YCC or leave it, we will continue to buy JGBs. We will not cause a discontinuation of our monetary policy.”

[7th March] Board Member Nakagawa:

• Japan's economy making steady progress toward achievement of price target, adds given risks and uncertainties, she would like to gather information without any preset idea and make appropriate monetary policy decision. Main scenario is that expectations of rising wages will underpin consumer sentiment, but there is risk that real income will undershoot and weigh on demand, economy and prices.


• Can foresee Japan's economy achieving a positive wage-inflation cycle. If the BoJ judges that sustained achievement of price goal foreseen, BoJ will decide whether or not to tweak YCC, risky asset buying and other policy means.


• Some weak signs seen in consumption data but no big change to trend of moderate increase. prospects of sustainably achieving 2% inflation target is gradually heightening. It will take until autumn and beyond if BoJ was to wait until smaller firms' wage negotiation outcome. Will scrutinize whether and how long BoJ should analyze data in deciding policy shift.


• When debating ending negative rate, BoJ should also debate fate of other unconventional monetary easing tools in place. Developments in consumption would be very important factor in deciding when to end negative rates.


• Don't necessarily need to wait for all of small, mid-sized firms' wage talks outcome in deciding when to end negative rates. It's important to ensure wages keep rising as a trend and sustain inflation around 2%. Have no pre-set idea in mind on whether to end YCC in tandem with an exit from negative rates. Still have 10 days until the policy meeting, during which she will look at various data from hearings they conducted and noted that data is available on a daily basis.

[29th February] Board Member Takata:

• Japan's economy is in inflection point of changing 'norm' that people think wages and prices are not rising, adds achievement of price target is coming into sight. Exit measures would include abandoning yield curve control framework, ending negative rates, overshoot commitment. Achievement of 2% inflation target is becoming in sight despite uncertainty of economy outlook.


• He said he would call for a gear shift in policy and not going backward, says not made up mind yet on monetary policy decision, when asked about whether to end negative interest rates in March or April.


• Not thinking of raising interest rates one after another. Gradual steps will be needed amid mixed circumstances surrounding small firms. Various options remain when we dismantle yield curve control framework. Will not respond automatically to any target when asked about rate hikes after ending negative rates. There is no order of steps in monetary policy exit. We need to keep some easing measures to some extent.

[22nd February] Former policymaker Sakurai

• BoJ could end negative rates in March if this year's pay hikes exceed 4%, although there's an equal chance it may wait until April. BoJ appears to be fully prepared for an exit, it's a question of when Governor Ueda makes a call. (Sakurai rightly predicted the BoJ's tweak to YCC in October 2023).

GOVERNMENT COMMENTARY

[15 March] Japanese government and BoJ are to keep the joint statement including the 2% price target, according to JiJi. 

[15 March] Japanese Finance Minister Suzuki says seeing strong pay hike move in wage talks, adds government is to mobilise all policy steps available to continue the wave of wage hikes, and Japan is no longer in deflation.

[13th March] Japanese PM Kishida says will call for pay hikes exceeding last year at small and mid-sized firms during the meeting with labour union and management; Japan not yet emerging out of deflation.

[13th March] Japanese Chief Cabinet Secretary Hayashi said it is important for wage hikes to spread to mid-sized and small companies, while he added they are seeing strong momentum for wage hikes. 

[13th March] Japanese PM Adviser Yata says wage hikes this year likely to exceed last year's; Must continue pay rises next year and thereafter to defeat deflation; must broaden pay hikes to workers nationwide and in every prefecture  When asked if solid wage offers could trigger end to NIRP in march, Yata says government will not meddle with the BoJ's independent policy-making.

[12 March] Japanese Economy Minister says this year's wages are key turning point to growth economy and have strong expectations for momentum into wage responses. 

[8th March] Japanese Finance Minister Suzuki says there's risk rising interest rates could pressure Japan's debt and not at a stage where fiscal targets other than primary budget balance can be mentioned.

[7th March] Japanese government official says household spending drop in January does not necessarily reflect consumption trend, while the official noted that the Y/Y decline is the biggest drop since February 2021.

[7th March] Some Japanese government officials are said to support a near-term BoJ lift-off, according to Bloomberg. 

[5th March] Japan's Top Currency Diplomat Kanda must brace for higher interest rates environment given assumed interest rates raised to 1.9% from 1.1%; must strive for responsible fiscal management by achieving primary budget balancing in FY25/26.

[5th March] Japan's Deputy Chief Cabinet Secretary says it is important to embed new business practices within Japan, so costs are appropriately passed on. Hopes BoJ continues to work closely with the gov't. Gradually seeing a positive cycle of rising growth/wages.

[4th March] Japanese Finance Minister Suzuki says no truth to media report that govt considering announcing end of deflation. No truth to market views that govt may be considering announcing exit from deflation in sync with BoJ's decision on negative rates policy.

[4th March] Japanese Chief Cabinet Secretary says the economy is not yet at a stage where the government can call an end to deflation.

[4th March] Japan Minister of State for Economic and Fiscal Policy Shindo says not thinking now of declaring anything, when asked whether govt could call an end to deflation.

RENGO FIRST WAGE TALLY

RESULT: Japan RENGO 1st Wage Tally: 5.28% (exp. 4.1%; 2023 final figure 3.6%).

BOJ RATE HIKE THRESHOLD: The BoJ at least needs the outcome of 3.8% to proceed with a rate hike, according to the Bloomberg survey. 

DEMAND: Japan's Rengo wage demand this year reportedly at 5.85% (4.49% in 2023), via Bloomberg; Reuters adds that the 5.85% figure exceeds 5.0% for the first occasion in 30-years.

WAGES DATA

[6th March] Japanese Labour Cash Earnings YY (Jan) 2.0% vs Exp. 1.3% (Prev. 1.0%, Rev. 0.8%)

[6th March] Japanese Real Cash Earnings YY (Jan) -0.6% vs Exp. -1.5% (Prev. -1.9%, Rev. -2.0%)

INFLATION AND GROWTH

[12th March] Corp Goods Price MM (Feb) 0.2% vs. Exp. 0.1% (Prev. 0.0%);  Corp Goods Price YY (Feb) 0.6% vs. Exp. 0.5% (Prev. 0.2%)

[10th March] Japanese GDP Revised QQ (Q4) 0.1% vs. Exp. 0.3% (Prev. -0.1%); GDP Rev QQ Annualised (Q4) 0.4% vs. Exp. 1.1% (Prev. -0.4%)

[4th March] Japanese CPI, Overall Tokyo (Feb) 2.6% (Prev. 1.6%, Rev. 1.8%)

[4th March] Japanese CPI Tokyo Ex fresh food YY (Feb) 2.5% vs. Exp. 2.5% (Prev. 1.6%, Rev. 1.8%)

[26th February] Japanese National CPI YY (Jan) 2.2% vs. Exp. 1.9% (Prev. 2.6%)

[26th February] Japanese CPI Index Ex Fresh Food (Jan) 106.4 (Prev. 106.4)

[26th February] Japanese National CPI Ex. Fresh Food & Energy YY (Jan) 3.5% vs. Exp. 3.3% (Prev. 3.7%)

[26th February] Japanese National CPI Ex. Fresh Food YY (Jan) 2.0% vs. Exp. 1.8% (Prev. 2.3%)

LOOKING AHEAD

[19th March] BoJ meeting

18 Mar 2024 - 17:13- Fixed IncomeData- Source: Newsquawk