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Japan Times
5 days ago
- Business
- Japan Times
Tokyo prices rising most in two years keeps BOJ on hike path
Prices in Tokyo jumped the most in two years on surging food costs, keeping the Bank of Japan (BOJ) on track for another rate hike in the coming months. Consumer prices excluding fresh food rose 3.6% in the capital in May from a year earlier, accelerating from 3.4% in April, the internal affairs ministry said Friday. The increase, which outpaced economists' median forecast of a 3.5% gain, was the biggest since January 2023. Overall inflation came to 3.4%, matching a revised 3.4% in April. The readings were partly distorted by policy-related factors, including the fading impact of last year's school fee cuts. While Tokyo's consumer price index (CPI) figures serve as a leading indicator for national inflation trends, the high school subsidies were in effect only in the capital. A main driver in the latest figures was prices for foods other than fresh produce, for which gains accelerated to 6.9% from 6.4% in the previous month. Gains in rice prices held roughly steady at 93.7%. Food price hikes "have pushed down real wages, which is negative for the economy. From a monetary policy perspective, the BOJ likely views it as stronger than on track,' said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities. Against the backdrop of recent trends, the latest price data will likely keep the BOJ on track for another rate increase in coming months. Figures last week showed that national inflation has stayed at or above the BOJ's 2% target for three years, and Gov. Kazuo Ueda said this week that the bank is closer to achieving its target than at any other time in the last three decades. The BOJ warned of potential spillover effects from hot prices for food in its latest outlook, saying, "With regard to the recent rise in food prices, such as rice prices, even when price rises themselves mainly result from weather conditions, attention is warranted on the possibility that these rises may induce second-round effects on underlying CPI inflation through changes in household sentiment and inflation expectations.' The BOJ next sets policy at the end of a two-day meeting on June 17, when it is widely expected to leave interest rates unchanged while updating guidance on plans to scale back its government bond purchases. Markets anticipate the bank will continue its gradual quantitative tightening beyond April 2026. The food price gains are a worrisome sign for Prime Minister Shigeru Ishiba ahead of a summer election expected to be held by July. Persistent increases in living costs have fueled public discontent in Japan, weighing heavily on support for Ishiba, whose approval rating has fallen to its lowest level since he took office in October. A majority of surveyed respondents cited economic issues as their top concern. Newly appointed agriculture minister Shinjiro Koizumi has pledged to halve the price of the staple grain to around ¥2,000 ($14) per 5 kilograms. To achieve this, the government is in the process of releasing 300,000 metric tons of stockpiled rice into the market at a fixed wholesale price of about ¥10,000 per 60 kg. Market participants have responded favorably to initial steps on that front. The government has also taken other steps to soothe voters, unveiling a ¥900 billion stimulus package this week that will be funded through existing budget allocations and reserve funds. The package includes the reinstatement of utility subsidies from July through September. Energy prices weighed on the CPI gauge in May, with electricity price growth slowing to 10.8% from 13.1%. Service price growth picked up to 2.2%. The data are in line with the central bank's assessment in its latest outlook that the economy has recovered moderately with pockets of weakness. A key risk obscuring the economic outlook remains U.S. trade policies. Ishiba and U.S. President Donald Trump spoke by phone for the second time in a week Thursday as Japan's premier pressed his case for exemptions from tariffs. Japan currently faces a 25% tariff on cars, steel and aluminum, alongside a 10% levy on all other goods that is set to rise to 24% in early July barring a trade agreement. Japan's chief trade negotiator Ryosei Akazawa will meet with his U.S. counterparts in Washington later Friday. Questions over the tariffs could deter the BOJ from hiking rates in the near term, according to Maruyama. "Just because inflation is on track doesn't automatically mean the bank can raise interest rates — it still needs to assess tariff impacts,' he said. "Prices being on track is definitely a necessary condition, but I don't think it's enough on its own to determine the timing of a decision.' Reflecting early signs of business anxiety, Japan's industrial production fell 0.9% in April from the previous month, according to the industry ministry. Economists had estimated a 1.4% decline. Manufacturers expect a 9% gain in output this month. In other data Friday, the jobless rate stood at 2.5% in April, the same as in the previous month, according to the internal affairs ministry. The job-to-applicant ratio held at 1.26, meaning there were 126 jobs available for every 100 job seekers, the labor ministry reported separately. Continued labor-market tightness is expected to keep upward pressure on wages as firms compete to hire and retain workers. That could help sustain a virtuous cycle of wage and price growth — a central aim of both the government and the BOJ as they pursue their respective policy strategies. Household sentiment remains fragile amid inflation and economic uncertainty. A separate report from the industry ministry showed that retail sales rose 0.5% in April from the previous month.
Wall Street Journal
5 days ago
- Business
- Wall Street Journal
JGB Futures Rise; Market Likely to Track Gains in U.S. Treasurys
0006 GMT — JGB futures rise in early Tokyo session, with Japan's government bond market likely to track overnight price gains in U.S. Treasurys. Both JGBs and Treasurys tend to move in tandem. The Finance Ministry's auction today of 2.6 trillion yen in two-year sovereign notes may garner interest from investors, analysts say. 'Recent 2-year and T-bill auctions have cleared smoothly, or even drawn solid demand, and we expect a certain degree of collateral demand' at today's sale, SMBC Nikko Securities' Lisa Mochizuki says in a research report. Also, 'factoring in the fact that there's limited scope for 2-year yield to rise further ahead, we expect a solid result,' the junior analyst adds. Ten-year JGB futures are 0.31 yen higher at 139.26 yen. (
Mint
6 days ago
- Business
- Mint
Weak Auction Keeps Pressure on Japan to Reduce Long-Bond Supply
Japanese sovereign bonds fell after an auction of 40-year debt met the weakest demand since July, adding pressure on the government to reduce issuance of such securities. The 40-year yield rose 5 basis points following the sale, to 3.335%. Yields on this maturity and the 30-year tenor last week reached the highest on record after the softest demand since 2012 at an auction of 20-year bonds. 'The fact today's auction didn't go very well supports the narrative that the government will adjust its issuance of super-long bonds,' said Kazuhiro Sasaki, head of research at Phillip Securities Japan. Wednesday's sale was a key test globally for longer tenors amid concern that rising government spending will take budget deficits into dangerous territory. In Japan it was also being viewed as an important gauge of appetite from large institutional investors, who have not filled the gap left by the central bank reducing its purchases. 'The weak bidding for the 40-year bond was probably due to the continued high volatility and the fact that the actual issuance amount will not be reduced for another month, making most investors reluctant to take on risk,' said Ataru Okumura, a senior interest-rate strategist at SMBC Nikko Securities. This week's auction results also show how traders and investors are nervous, especially with the finance ministry due to sell benchmark 10-year notes and 30-year debt next week. In a sign that the government may be preparing to adjust issuance after the rout, the finance ministry sent a questionnaire to market participants on Monday evening that asked for their views on issuance and the current market situation, according to people familiar with the matter. The step was seen as unusual because of its timing and the wide group of people contacted, and sparked a rally in super-long-term government bonds Tuesday. The moves followed aggressive upward pressure on global borrowing costs last week that drove up yields on long-maturity debt from the US to Japan. 'In a sense, this is a positive for the bond market, because it increases the likelihood that the finance ministry will do something,' said Sasaki at Phillip Securities, referring to building pressure on Japan's long-term yields. The average bid-to-cover ratio, a measure of demand, for Wednesday's ¥500 billion auction of March 2065 bonds was 2.21. That was lower than 2.92 at the last auction in March. Next month is shaping up as pivotal for the bond market, with the central bank holding a policy meeting June 16-17 at which it is expected to discuss any changes to its tapering of debt purchases. Meanwhile, the finance ministry's questionnaire suggests that it's considering input from market participants on bond issuance. With assistance from Masahiro Hidaka and Alice French. This article was generated from an automated news agency feed without modifications to text.
Japan Times
6 days ago
- Business
- Japan Times
Japan's 40-year bond sale shows weakest demand since July
Japan's auction of 40-year government bonds on Wednesday met demand that was the weakest since July, as investor appetite fell after volatility surged in global debt markets. The 40-year yield rose 9 basis points to 3.375% following the sale, as the 30-year tenor jumped 10 basis points. "Given we have just had a yield shock, I don't think anyone was expecting a really strong sale,' said Stephen Spratt, rates strategist at Societe Generale. Spratt said demand was unimpressive. The sale was a key test globally for longer tenors amid concern that rising government spending will take budget deficits into dangerous territory. In Japan it was also being viewed as an important gauge of appetite from large institutional investors, who have not filled the gap left by the central bank reducing its purchases. "The weak bidding for the 40-year bond was probably due to the continued high volatility and the fact that the actual issuance amount will not be reduced for another month, making most investors reluctant to take on risk,' said Ataru Okumura, a senior interest-rate strategist at SMBC Nikko Securities. Superlong-term government bonds had rallied Tuesday on signs that the Finance Ministry may be prepared to adjust debt issuance following a rout in the market. The moves followed aggressive upward pressure on global borrowing costs last week that drove up yields on long-maturity debt from the United States to Japan. The average bid-to-cover ratio, a measure of demand, for the bonds was 2.21 for the sale of the Finance Ministry's ¥500 billion ($3.5 billion) issue maturing in March 2065. That was lower than 2.92 at the last auction in March. "The fact today's auction didn't go very well supports the narrative that the government will adjust its issuance of superlong bonds,' said Kazuhiro Sasaki, head of research at Phillip Securities Japan. "So in a sense, this is a positive for the bond market, because it increases the likelihood that the Finance Ministry will do something.' The Finance Ministry — in a move that was unusual because of its timing and the wide group of people contacted — sent a questionnaire to market participants on Monday evening that asked for their views on issuance and the current market situation, said people familiar with the situation. Next month is shaping up as pivotal for the bond market, with the central bank holding a policy meeting on June 16 and 17 at which it is expected to consider any changes to its tapering of debt purchases. Meanwhile, the Finance Ministry is expected to be considering input from market participants on bond issuance.
Wall Street Journal
27-05-2025
- Business
- Wall Street Journal
Ultralong-Dated JGBs Jump; Focus Likely on BOJ's IMES Conference
0005 GMT — Ultralong-dated JGBs jump in price terms in the morning Tokyo session on possible position adjustments. Market focus is likely on the Bank of Japan's Institute for Monetary and Economic Studies conference being held today and Wednesday. With speculation swirling about the timing of the BOJ's 8301 4.02%increase; green up pointing triangle next rate increase, market participants may watch closely for signals in Gov. Ueda's opening remarks. However, SMBC Nikko Securities doesn't expect any strong messages about the outlook given major uncertainty from various sources, senior Japan rates strategist Ataru Okumura says in a recent research report. The 30-year JGB yield falls 9 bps to 2.945%; the 40-year yield slips 10 bps to 3.435%. (
