US Treasuries have rallied since Friday’s payrolls report and the weak services ISM. But markets are paying a lot more attention to Japan now. Another rise in the Tokyo CPI for December has pushed JGB yields to new highs this morning. The 10-year yield is testing the 0.5% cap. The 30-year yield jumped back up to 1.657% earlier today.
The implications of this will not necessarily be immediately felt across sovereign bond markets. But with every stronger inflation print, the chances of a more hawkish nomination for the next BoJ Governor increase, and an abandonment of YCC. Bigger ructions for financial markets may come in March/April later this year.
Kishida’s public approval rating is at its lowest ever and still dropping. Kishida has openly called for business leaders to accelerate wage rises to avoid ‘stagflation’. He will double down on this ahead of Rengo.
The former BoJ Deputy Governor Hirohide Yamaguchi has emerged as contender to be the next BoJ Governor. According to the Sankei newspaper, as reported by Reuters, “The choice would reflect Prime Minister Fumio Kishida’s increasingly clear shift away from former premier Shinzo Abe’s “Abenomics” reflationary policies”.
