Japanese Prime Minister Abe appears to be keeping to his campaign promises, fulfilling the first one of his term as the Japanese cabinet approves a JPY 10.3trl fiscal stimulus package which is expected to add 2% to real GDP and 600,000 jobs. Comments from the Japanese PM regarding the Bank of Japan’s monetary policy have also been supportive of USD/JPY which has printed a session high of 89.35. Abe said that the BoJ should follow the Fed’s lead and target employment when constructing monetary policy. Abe also commented on the details of a 2% inflation target, saying that a long-term target would be useless. The devil is in the detail when it comes to the inflation target, a long term target would give the BoJ less motivation to act in the short term and Japan’s economy needs immediate attention to stem the decline. Another factor piling on the pressure for the JPY was the first deficit in the Japanese current account for 10 months.
Today’s data highlight has been Chinese CPI which came in firmer than expected at 2.5% Vs. Exp. 2.3% (Prev. 2.0%). A contributing factor to the increase in the headline was a rise in food prices; this was attributed to the forthcoming Luna New Year demand where Chinese consumers will look to fill their bellies in celebration. As a result the overall reaction to the release was relatively muted as analysts look for a return to normality when the holiday passes; however, the slightly higher reading has kept the CNY around 19-year highs in the currency market.
Elsewhere the Bank of Korea kept rates on hold at 2.75%, and in a delayed reaction KRW strengthened to hit an 18-month high and consequently weighed on the local stock market. Recently the KRW has appreciated as the South Korean currency has benefited from hot money flows.
Looking forward we have Indian Industrial Production scheduled for release at 0530GMT/2330CST.
As of 0258 GMT:
ASX200 (-0.30%), Nikkei 225 (+1.20%), Shanghai Comp. (-0.28%), Hang Seng (-0.03%), KOSPI (-0.28%)
10 Jan 2013 - 21:50 - Equities Data - Source: RANsquawk
RANsquawk provides audio news and commentary for over 15,000 professional traders and brokers worldwide. Services include: