Futures Holding Weaker After Labor Earnings Beat

In Tokyo morning trade, JGB futures are holding in negative territory, -11 compared to settlement levels.

• Japan's January wages data was stronger than expected. The headline labor cash earnings rose +2.0% y/y, versus a +1.2% forecast and a prior +0.8%. In real terms, earnings were still in negative terms, but not as much as forecast. We were -0.6% y/y, versus -1.5% projected and -2.1% prior.
• Cash earnings on the same sample basis were +2.0%y/y, against a +1.9% forecast and +2.0% prior. Scheduled full-time pay (on the same sample base) was +2.0% y/y in line with expectations but down slightly from the +2.1% prior outcome.
• This may add confidence that firmer wage gains will continue in the first half, particularly during the current wage negotiation period, where there is evidence that some firms are raising wages more so than they did last year.
• Offshore investors stepped up bond buying last week, with ¥572.5bn in inflows. The net flow backdrop for this segment is around flat though for the past 3 weeks. Local investors stepped up purchases of offshore bonds, with ¥484.6bn in outflows. This ended a run of two consecutive weeks of net selling for this segment.
• Cash JGBs are slightly cheaper, with yields flat to 1bp higher.
• Swaps are slightly mixed. Swap spreads are mixed.