Morning Brief – Japanese CPI ramps up

During the Asian session, the market took its cue from a high inflation number from Japan and rumours that the People Bank of China is about to embark on a reserve ratio cut.

Tokyo’s inflation sped to its fastest pace since 1982. The Tokyo data is used as indicative of national level inflation, which appears likely to also rise in November. 

The core consumer price index for the Ku-area of Tokyo in Japan surged 3.6% to 103.6 points in November 2022, accelerating at the fastest pace in 40 years amid broadening inflationary pressures due to high raw material costs and a weak yen.

Japanese Government Bonds came under pressure on the data, the yield on 10-year JGBs rose to near the top of the Bank of Japan target band. 

Tokyo’s core inflation rate, a leading indicator of nationwide price trends, also exceeded forecasts for a 3.5% rise and followed a 3.4% gain in October. It exceeded the Bank of Japan’s 2% target for the sixth straight month as businesses continued to pass on higher costs to consumers.

Still, the BOJ is widely expected to maintain ultra-loose monetary policy despite rising inflation and a weakening yen as it sees external factors driving such trends, while domestic wage growth and consumption remain soft.

I believe that despite rising inflation the Bank of Japan have been adamant in insisting its transitory, driven by cost-push factors that will dissipate.

Chinese state financial media says an RRR cut for all banks, for the record RRR refers to the amount of cash banks have to keep in reserve, in other words it Reserve Requirement Ratio.

The optimism that normally comes with a Chinese RRR cut was notable offset as China’s new COVID case count for the day has hit a fresh record high, nearly 32,000.

More bad news Tesla is recalling more than 67,000 Model X and S cars imported into China. We could probably expect Tesla’s share price to tumble on the open after the Thanksgiving Holiday ends.

Cars made during the September 2013 and November 2020 period for power management issues. There are also recalls on Model 3 vehicles, some imported and some locally made, for seatbelt issues.