Assessing Developments From The Long Weekend

Tokyo returns from the elongated weekend after the final overnight session of last week saw JGB futures extend on their Tokyo bid in lieu of soft wage and ISM services data out of the U.S. That left the contract +25 at the close of post-Tokyo trade.

• Since then, we have seen some light richening in U.S. Tsys, which, when coupled with domestic participants reacting to Friday’s post-payrolls/ISM move in wider core global FI markets, may lend support to the space.
• Countering that has been a firmer than expected core Tokyo CPI release, which hit +4.0% Y/Y, with the core-core measure ticking up to 2.7%, in line with exp., although household spending was softer than expected, falling Y/Y.
• Also note that the weekend saw PM Kishida flag that his gov’t and the BoJ must discuss their relationship when it comes to guiding economic policy after he names a new BoJ Governor. Kishida also highlighted the need for clear communication with the markets re: monetary policy.
• The local docket is thin for the remainder of the session, which will leave local participant reaction to the aforementioned news flow at the fore.