BoJ hawkish-hold with two dissenters, to offload ETF holdings

Asia Market Update: BOJ hawkish-hold with 2 dissenters, to offload ETF holdings; Markets digest bigger picture post-US Fed cut.

General trend and developments

- The Bank of Japan held at 0.5%, as expected. However, resident hawks Takata and Tamura both wanted a hike in a 7-2 split decision. BOJ finally announced a plan to offload ETF holdings and J-REITS; to sell about ¥330B of ETFs per year and ¥5.5B of J-REITS in market value per year. To begin sales “when operational preparations completed”.

- USD/JPY lost -0.5% and the Nikkei 225 reversed heavily, off its fresh record morning highs (+1% to 45,852), to be down -1.8%. However, sharply pared losses to be only -0.5% at time of this report. Notably no contagion in US equity FUTs throughout, which stayed largely flat.

- Post-BOJ Japanese yields were up highest in the belly of the curve for a change with 5-year and 10-year JGBs up >4bps, re-approaching 2008 highs. (Long-end stayed flat to down as the curve flattened).

- Elsewhere, including Japan itself prior to the BOJ, markets mainly static since the initial updraft in equities and rates following the Wednesday Fed rate cut and dot plot projections as traders reassessed just how much easing there will be. US yields continued to tick back up in the US session even as equities continued to hit new highs. In Asia, ASX 200 out of Australia outperformed, +0.6% with all other key Asian indices down somewhat.

- Japan’s CPI for August (released prior to the BOJ decision) saw the headline figure slightly softer than expected, with the Core read coming in as expected, although lowest since Nov 2024.

- OIS pricing for a BOJ Oct hike jumped to 54% (vs 32.5% yesterday), with a hike now almost fully priced for the Jan meeting. (vs 64.5% by Dec yesterday).

- Counter to the recent run-up in in Japanese equities to fresh record highs, last week’s flows data showed foreigners to have been net sellers of Japanese stocks by -¥2.0T

- The much anticipated Trump-Xi call is due Friday 9am ET, with the four-time extended TikTok US deal on the line. US also said to be looking for Chinese purchases of soybeans and aircraft.

- Press reports that the Trump Admin looking to apply Japan’s $550B investment fund for jump starting American manufacturing.

- In Japanese politics, a recent Yomiuri poll showed Sanae Takaichi leading the race for LDP President, but another poll by Jiji Press put Shinjiro Koizumi slightly in front of Takaichi, 23.8% to 21%, Hayashi and Motegi on 5.9% each and Takayuki Kobayashi on 3.1%.

- Amid yesterday’s poor Q2 GDP data out of New Zealand, today a worsening trade deficit for August. Kiwi dollar stayed down against all-comers, 112 handle vs AUD being its lowest since 2022. [However, later the RBNZ announced its latest weekly "Kiwi-GDP" Nowcast estimating Q3 GDP to be in expansion].

- US corporate bond spreads at a 27-year low following US Fed rate cut.

- Fedex +5.5% A/H on Q2 beating earnings estimates and guiding 'sequential improvement' for earnings and revenues.

- US equity FUTs flat during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Fri Sept 19th (Fri eve UK Aug Retail Sales).

Holidays in Asia this week

- Mon Sept 15th Japan.

- Tue Sept 16th Malaysia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.6% at 8,796.

- Australia sells A$1.0B v A$1.0B indicated in 1.00% Dec 2030 bonds, Avg Yield: 3.6416% v 3.6145% prior, bid to cover 4.24x v 3.47x prior.

- New Zealand Aug Trade Balance (NZD): -1.2B v -0.6B prior.

- RBNZ announces latest weekly "Kiwi-GDP" Nowcast Q3 GDP estimate shows expansion.

- RBNZ: New Zealand Aug Credit Card Spending M/M: +2.2%; Y/Y +3.5%.

China/Hong Kong

- Hang Seng opens +0.1% at 26,583; Shanghai Composite opens -0.1% at 3,830.

- China PBOC has 'bigger room' for easing after US Fed rate cuts - Shanghai Securities News.

- China equities rally 'can continue' in spite of drop yesterday - China Securities Journal.

- China Commerce Ministry (MOFCOM): EU automakers are fully capable of adapting to market competition [overnight update].

- China MOF sells 10-year and 30-year ultra-long bonds.

- China PBOC sets Yuan reference rate: 7.1128 v 7.1085 prior (weakest since Aug 26th).

- China PBOC Open Market Operation (OMO): Injects CNY354B in 7-day reverse repos; Net injects CNY124B v injects CNY195B prior.

Japan

- Nikkei 225 opens +0.7% at 45,633 (fresh record high).

- *(JP) BANK OF JAPAN (BOJ) LEAVES TARGET RATE UNCHANGED AT 0.50%; AS EXPECTED; announces plan to offload ETF holdings.

- JAPAN AUG NATIONAL CPI Y/Y: 2.7% V 2.8%E; CPI (EX-FRESH FOOD) Y/Y: 2.7% V 2.7%E (Core read falls to lowest since Nov 2024).

- Japan LDP lawmaker Sanae Takaichi (PM candidate): Will work on system of combining cash payouts and income tax reduction - press conference.

- Japan Fin Min Kato: Will monitor impact of US economy, finance on Japan - press.

- Japan releases weekly flows data [period ended Sept 12th]: Foreign buying of Japan equities: -¥2.03T v ¥108.6B prior; Japan buying of foreign bonds: ¥1.48T v ¥208.0B prior.

- Japan LDP lawmaker Takaichi to call for gradually lowering ratio of Govt debt to GDP as her campaign pledge.

- Softbank Reportedly to cut up to 20% of staff at Vision Fund unit - press citing memo.

Korea

- Kospi opens flat at 3,461.

- South Korea govt gives details on KRW150T fund; Revises bank capital rule, to lower risk weight for banks' equity investments - financial press.

- Follow Up: South Korea government to launch export guarantee program worth ~KRW400B for steelmakers hurt by US tariffs - Yonhap.

- South Korea is planning to restructure its steel sector in the face of oversupply from China - South Korea press.

Other Asia

- Malaysia Aug Trade Balance (MYR): 16.1B v 11.3Be.

- Thailand Central Bank (BOT): Has acted on the baht, monitoring closely.

- India’s SEBI dismisses Hindenburg allegations against group (update).

- Philippines [the world's largest rice importer] may extend rice import ban by a further 30 days - Agriculture Min statement.

- (TW) Trump Admin reportedly declines to approve $400M in military aid for Taiwan - press.

- *(TW) TAIWAN CENTRAL BANK (CBC) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 2.00% ; AS EXPECTED [overnight update].

North America

- (US) Trump Admin reportedly to explore govt-backed manufacturing boost using $550B fund - WSJ.

- (US) Senate Majority Leader Thune: Senate will also vote on the House stopgap bill on Fri [Sept 19th].

- (US) House Speaker Johnson: House has the votes to pass stopgap funding bill.

- (MX) Canada PM Carney: We will create a new bilateral security dialogue with Mexico - comments in joint press conference with Pres Sheinbaum of Mexico, in Mexico City.

- FTC sues Live Nation and TicketMaster for engaging in illegal ticket resale tactics and deceiving artists and consumers over price and ticket limits - press.

- (US) Trump Admin asks Supreme Court to allow the President to fire Fed Gov Lisa Cook while the legal battle over her firing proceeds - press.

- (US) Pres Trump said seeking to accelerate development of large power generation projects to meet AI demand – press.

- (US) Supreme Court to hear oral arguments on legality of Trump IEEPA tariff powers on Nov 5th.

- *(US) JULY TOTAL NET TIC FLOWS: $2.1B V $77.8B PRIOR; NET LONG-TERM TIC FLOWS: $49.2B V $150.8B PRIOR.

- US Pres Trump: TOMORROW, House Republicans are taking a very important Vote to pass a CLEAN FUNDING BILL - Truth Social post.

- *(US) WEEKLY EIA NATURAL GAS INVENTORIES: +90BCF VS. +78-80 BCF INDICATED RANGE.

- *(US) AUG LEADING INDEX: -0.5% V -0.2%E (weakest since April).

- (CA) Canada Sept CFIB Business Barometer: 50.2 v 48.3 prior.

- (US) White House NEC Dir Hassett: 25 bps cut was a good first step by the Fed; Inflation worse in past three months than previously seen.

- (US) INITIAL JOBLESS CLAIMS: 231K V 240KE; CONTINUING CLAIMS: 1.920M V 1.950ME.

- (US) SEPT PHILADELPHIA FED BUSINESS OUTLOOK: 23.2 V 1.7E; New Orders: 12.4 v -1.9 prior; Prices Paid: 46.8 v 66.8 prior.

- NVDA Intel to design and manufacture custom data center and client CPUs with NVIDIA NVLink; NVIDIA to invest $5B in Intel common stock at $23.28/shr; Intel will NOT be manufacturing Nvidia chips per today's announcement.

- Fedex Guides Q2 Adj EPS 'sequential improvement' v $4.04e; Cautiously optimistic for winter holiday delivery season; Expects trade environment to create $1.0B headwind in 2026 - earnings call comments.

Europe

- (UK) Sept GfK Consumer Confidence: -19 v -18e.

- (UK) BANK OF ENGLAND (BOE) LEAVES BANK RATE UNCHANGED AT 4.00%; AS EXPECTED; Reduces QT pace from £100B to £70B vs £60-70B estimates, effective from Oct.

- (UK) BOE SEPT MINUTES: VOTED 7-2 TO KEEP POLICY STEADY.

- (UK) Bank of England (BOE) Gov Bailey: Continue to think there will be more rate cuts; Don't think there is any stress in market around QT.

- (ES) ECB's Escriva (Spain): Signs that FX system is less biased towards one currency; opportunity for a bigger international role for the Euro.

- (ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATES UNCHANGED AT 7.00%; AS EXPECTED.

- (EU) ECB’s Nagel (Germany): Outlook for inflation is very stable.

- (RU) EU reportedly plans to phase out Russian LNG purchases after US Pres Trump pressure - press.

- (UK) PM Starmer: US and UK working together to bring peace in Middle East and Ukraine; Putin has shown true face, doesn't want peace; See no stress in gilt markets - comments in joint appearance with US Pres Trump.

Levels as of 01:20 ET

- Nikkei 225 -0.3%, ASX 200 +0.5%, Hang Seng -0.4%; Shanghai Composite -0.3; Kospi -0.5%.

- Equity S&P500 Futures flat; Nasdaq100 flat; DAX flat; FTSE100 -0.1%.

- EUR 1.1797-1.1791; JPY 147.20-148.11; AUD 0.6600-0.6620; NZD 0.5868-5992.

- Gold +0.3% at $3,690/oz; BTC -0.2% at $116,970; Crude Oil -0.3% at $63.41/bbl; Copper +0.3% at $4.6125/lb.