Back From Early Highs, BoJ Due

JGB futures have traded as a function of broader core fixed income gyrations, bid on the re-open on the aforementioned Pentagon worry re: the potential for Russia to deploy nuclear threats if the Ukraine conflict drags on, before fading back from best levels as some in the Asia-Pac region played down the likelihood of such a move and reacted to the start of the re-opening of manufacturing capacity in the Chinese city of Shenzhen. Futures hit the lunch break -7 vs. yesterday’s settlement, while cash JGBs sit within -/+0.5bp of settlement levels.

• Elsewhere, CPI data was largely inline with expectations, with the BoJ’s preferred core measure running at a meagre +0.6% Y/Y in February. A reminder that headline inflation dynamics are set to be driven by energy price & JPY movements in the coming months. This is the sort of cost push inflation that the BoJ will look through, given relatively limited wage growth & little in the way of demand pull-linked inflation. This upcoming BoJ decision is expected to be a bit of a non-event, with Governor Kuroda set to re-affirm the need for continued easing given the previously outlined inflation dynamic (see our preview of that event for more detail)