Morning Brief – Tokyo CPI and Fed Speak

The main market movers during the Asian session were the release of Tokyo CPI data and prepared remarks from Fed member Waller. The Japanese yen failed to react to today’s Tokyo CPI data.

Breaking down the data, the core consumer price index for the Ku-area of Tokyo in Japan rose 3.3% in February 2023 from a year earlier, slowing from a 42-year high of 4.3% logged in January and matching market forecasts.

Tokyo’s core inflation rate, a leading indicator for nationwide price trends, also surpassed the Bank of Japan’s 2% target for the ninth straight month, signalling that upward price movements in the country have not reached their peak yet.

This keeps the central bank under pressure to abandon its yield curve control policy as BOJ Governor Kazuo Ueda steps in. Nationwide core consumer prices rose 4.2% in January from a year ago, accelerating at the fastest pace in 41 years as companies passed on higher costs to household

Markets also looked past prepared remarks from Fed Waller, who said that the “Fed may need to raise rates beyond December’s ‘central tendency’ view of 5.1-5.4% if incoming job and inflation data does not pull back from strong readings for January.”

He also stated that “his  view will depend on what the data say” and “Data last month challenged my view in January that the FOMC was making significant progress in moderating activity and reducing inflation.”

On inflation he commented that the “FOMC will do what is needed to reduce the inflation to 2%” and ‘There may be some bumps on that path, but I assure you, the FOMC’s dual mandate objectives will be achieved‘.

Any interest comment was that  “Recent data indicate we have not made as much progress on inflation as thought” and “That goes for both overall and core inflation.”

The market now awaits a host of FED speakers later today who are likely to come out hawkish. Federal Reserve Bank of Dallas President Lorrie Logan

Federal Reserve Bank of Atlanta, President Raphael Bostic, Federal Reserve Board Governor Michelle Bowman, and Federal Reserve Bank of Richmond President Thomas Barkin.