Nominations On The Mind

JGB futures are +12 ahead of the lunch break, while cash JGBs sit 0.5-3.0bp richer with the 20- to 30-Year area leading on the curve. The swap curve has seen a more traditional flattening move, with swap spreads little changed to tighter as a result, suggesting receiver side swap flows have aided the bid in JGBS.

• JGB futures more than unwound the early, modest downtick, with local focus remaining on the impending round of BoJ leadership nominations from the Japanese government (Ueda is the favourite to become Governor, while Uchida & Himino are expected to be nominated for Deputy Governor roles, per last week’s well publicised Nikkei article).
• As we noted earlier, this leadership mix is seen as more of a centrist platform, as opposed to an outright hawkish or dovish setup, with many suggesting such appointments will cement expectations for a gradual normalisation of monetary policy.
• Locally, prelim Q4 GDP data was softer than expected, with inventories the major headwind for the headline print. While short-term dynamics should be looked through, we remind that wage negotiations and the eventual normalisation of BoJ policy settings (likely in the post-Kuroda era) will be key for the economy over the medium term.