Japan’s
finance minister Suzuki said today
that the
country was “no longer in deflation.” This
is a sharp turnaround from comments from officials previously.
Indeed, it was only Tuesday when Suzuki was reported as saying we
cannot declare deflation as beaten. Suzuki’s comment today is clear
support for the Bank of Japan to tighten policy.
For
a tightening of policy the board at the Bank of Japan will need to
see wage results that support the prospect of sustainable and stable
inflation around its 2% target. The Japan Renko wage news conference
is coming up at 16:15 Tokyo time (0715 GMT and 0315 US Eastern time)
and that will give us some guidance. Do note, however, that while the
wage rise agreed by the large corporations to be reported on at that
news conference today sets the upper limit for corporate Japan as a
whole, UBS has noted that “the amount of pass-through to small and
medium-sized firms will only become evident in the second (22 March)
and third (4 April) rounds of negotiations. The second round in
particular is typically considered crucial, as it will cover over
half of the total number of firms in scope.”
The
BoJ meet on April 18 and 19, and expectations are high for a policy
pivot at this meeting, but given the wage data to come later this
month and also in early April, the April 26 BoJ meeting may be the more
logical option for the pivot. In central bank land, a 5 week gap is
nothing. Having
said this the persistent news flow (JiJi, NHK, Nikkei reports,
amongst others) is for a March rate hike.
From
China today the People’s Bank of China left its medium-term lending
facility (MLF) rate unchanged at 2.5% for a seventh consecutive
month. In addition, the Bank injected 387 billion yuan vs. the 500 bn
maturing. This is the first net cash withdrawal through the MLF
liquidity instrument since November 2022.
At
its daily USD/CNY reference rate setting the rate was 7.0975 vs the 7.2058 expected.
This huge discrepancy of over 10 big figures, nearly 11, is the
biggest in 11 months. The Bank continues to prop up the yuan.
Regional
stocks lost ground following the weakness on Wall Street triggered by
another hot inflation reading (PPI @ 1.6% y/y vs. 1.1% expected).
The USD added to its Thursday gains, USD/JPY got as high as above 148.60 before running out of steam:
Bitcoin, and the crypto complex more broadly, lost ground. BTC/USD is around $67,500 as I post.