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2024

2023

  • Daiwa's View

    Daiwa's View

    15 January 2024 476 KB PDF
    • New development of lower volatility → lower bond yields ➢ Fed staff comments in minutes for Dec FOMC meeting suggest unusual uncertainty since pandemic may be diminishing
    • Lower volatility → lower yields possible this year
    • Could be painful development for JGB investors who were waiting for yields to rise on BOJ policy revisions
  • Daiwa's View

    Daiwa's View

    11 January 2024 415 KB PDF
    • Consensus on the Fed’s QT (Dec 2023)
    • MBS balance expected to continue decreasing, even after halt to reduction in UST balance
    • QT expected to slow in spring 2024
    • Consensus is optimistic for economic conditions, assuming ample liquidity remaining
  • Public Finance Watch

    Public Finance Watch

    10 January 2024 329 KB PDF
    • Noto earthquake to increase contingency reserve funds in FY24 budget bill, but no impact on calendar-based market issuance of JGBs
    • FY24 budget bill’s general contingency reserve fund increased to support areas hit by Noto Peninsula earthquake; new JGB issuance also increased
    • JGB issuance plan to be revised at same time, but calendar-based market issuance likely unchanged owing to use of front-loading issuance of refunding bonds
  • Daiwa's View

    Daiwa's View

    5 January 2024 521 KB PDF
    • Analysis of JGB term premiums
    • Expect increased interest in JGB term premiums if Japan transitions to “world with interest rates”
    • 10yr JGB yield rise above 0.9% last year linked to sharp UST term premium rise, but currently unsustainable
    • Immediate target is pre-QQE “0.5% risk-neutral yield + 0.5% term premium ≈ 1%”; see 0.4% + 0.4% ≈ 0.8% as realistic target for a dip-buying
  • Public Finance Watch

    Public Finance Watch

    4 January 2024 530 KB PDF
    • FY24 JGB issuance plan, draft budget, timing for issuing CT bonds
    • MOF plans to issue Y1.7tn in CT bonds with decisions on maturities/issuance timing expected around Mar; likely options are one issuance (Apr-Jun) or two (Apr-Jun + from Jul)
    • Calendar-based JGB market issuance plan cut by almost Y20tn; flowbased avg maturity has lengthened to about same level as before coronavirus
    • Draft budget supports public sector wage hikes; goal of returning spending to normal remains difficult due to many issues other than coronavirus; breaking from 30 years of deflation seen as essential
  • Daiwa's View

    Daiwa's View

    29 December 2023 326 KB PDF
    • BOJ Governor Ueda’s NHK interview and December Summary of Opinions
    • Room for discerning virtuous cycle, while still maintaining free hand; message reduces likelihood of Jan rate hike to some extent
    • Also signaled intention to not wait until July, when wage data for SMEs becomes available; left with impression that time frame for policy change has narrowed considerably
    • Honest determination to move to “world with interest rates”; discussed rate hike timing, not pros and cons
  • Daiwa's View

    Daiwa's View

    27 December 2023 442 KB PDF
    • Labour productivity and yen exchange rate
    • Sluggish labour productivity growth in Japan contributing to lower real effective yen exchange rate
    • USD/JPY actual exchange rate above purchasing power parity due to lower real effective yen exchange rate
  • Daiwa's View

    Daiwa's View

    27 December 2023 467 KB PDF
    • Will households’ foreign currency investments change?
    • Significant yen selling potential from change in households’ attitude toward investing
    • However, households headed by someone 60 or older hold 63.5% of all household financial assets in Japan; tend to value stability
    • Outward investment in securities much higher than Y3.0tn per year could suggest change in household investment behaviour