Morning Brief – Japan Core CPI Rises

As has been the case all week the Asian market session remained fixated on more US debt limit talks on Thursday evening US time and headlines to the effect that Biden and McCarthy were ‘near’ a debt limit deal.

US House Speaker McCarthy said, “We do not have a deal on debt ceiling” and “It’s hard, but we’re working and we’re going to continue until we get this done.”

Yesterday Fitch placed the US on negative credit rating watch, today the firm did the same for US home lending facilitators Freddie Mac and Fannie Mae.

In Japan today we had Tokyo area inflation data for May. All three measures remained above 3%. The headline and ‘excluding fresh food’ indexes fell below their April results.

However the index that excludes food and energy, known as core-core and the closest to the US measure of core inflation, rose from April to hit a 40-year high. Underlying price pressures remain worrisome despite the Bank of Japan continuing to insist that their forecasts show inflation is transitory.

Also from the Bank of Japan today were verbal intervention, and comments from finance minister Suzuki. Members said they are closely watching FX moves and added that FX rates should be set by market based on fundamentals. This is in response to the rapid yen weakening we have seen.

Retail sales data in Australia was unchanged from the prior month at AUD 35.3 billion in April 2023, after a 0.4% rise in March, flash data showed.

The latest result came following growth in the previous three months, as an increase in spending on winter clothing in response to cooler and wetter weather offset less expenditure on discretionary goods in response to cost-of-living pressures and rising interest rates.

There were mixed results across the states and territories with four falls and three rises, while the Northern Territory remained unchanged.