BoJ fulfills mkt expectations but rumors say watch out if Ueda dovish

Asia Market Update: BOJ fulfills mkt expectations but rumors say watch out if Ueda dovish; NZ econ data keeps improving; Focus on US Nov Existing Home Sales.

General trend and developments

- Asia saved its best day of the week for Friday, with all equity indices recovering some of the losses earlier in the week.

- Bank of Japan (BOJ) fulfilled high expectations and at last increased the policy rate by a further 25bps to 0.75%, the highest in 30 years. The vote was unanimous, although the Statement noted that prior hawkish dissenter Takata objected to the description of the price outlook. Nikkei extended gains to be +1.5%, but later pared gains to +1.2%. Dollar actually firmed again the Yen by 50bps, indicating the move was indeed fully priced in, Japanese yields rose steadily rose across the curve after the decision, by 4-5 bps. [20-year JGBs hit fresh record high close to 3%, and 10-year JGBs hit 2.01% for first and time since 1999]

- **Trader's Note: Prior to the BOJ decision, there were rumors that the Japan MOF might intervene in the FX market if the BOJ Gov Ueda conveys ‘something dovish’ in his press conference, scheduled from 01:30 ET / 06:30 GMT

- Japan national CPI for November was inline ahead of the BOJ rate decision.

- New Zealand Business and Consumer Confidence both rose for December, with Consumer confidence back above 100 hitting a four-year high. NZ trade deficit also narrowed significantly to be close to zero. NZ retail card spending also keeps improving.

- Nike -11% A/H as the company warned sales to remain weak for Q3, with reduced gross margins due to tariffs. Meanwhile Fedex stock was flat A/H despite beating earnings and revenue estimates, and narrowing guidance to the high-end.

- Trump Admin said to initiate "multi-agency review" of Nvidia H200 licenses for sales to China. Comes as House Democrats introduce a bill to ban US AI chip sales to China.

- China PBOC set the Yuan rate the strongest since Sept 30th, 2024. Extra injection in the 7-day and 14-day reverse repos also comes amid speculation by Chinese media of aa PBOC RRR cut in January.

- US equity FUTs flat to +0.1% during Asian trading.

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

- Fri Dec 19th (Fri night US Nov Existing Home Sales).

Holidays in Asia this week

- No holidays in Asia this week.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.5% at 8,626.

- Australia Nov Private Sector Credit M/M: 0.6% v 0.6%e; Y/Y: 7.4% v 7.3% prior.

- Australia proposes reducing concessions for pensions above A$3M.

- New Zealand Dec ANZ Consumer Confidence Index: 101.5 v 98.4 prior (four-year high).

- New Zealand Dec ANZ Business Confidence: 73.6 v 67.1 prior.

- New Zealand Nov Trade Balance (NZD): -163M v -1.5B prior.

- RBNZ: New Zealand Nov Credit Card Spending M/M: 1.6% v 1.5% m/m; Y/Y +4.7%.

- Follow up: New Zealand Defense Min Collins: Signs defense, security agreements with Japan – press.

- Fitch: Affirms New Zealand Sovereign Rating at AA+; Notes fiscal consolidation has been hampered by gradual recovery.

China/Hong Kong

- Hang Seng opens +0.5% at 25,634; Shanghai Composite opens +0.1% at 3,878.

- China outbound funds program (QDLP) reportedly sees 'new products stall' - US financial press.

- Trump Admin said to initiate "multi-agency review" of Nvidia H200 licenses for sales to China - financial press, citing sources.

- China PBOC RRPs 'fuel' expectations for Jan RRR cut - Chinese press.

- House Democrats introduce bill to ban US AI chip sales to China.

- Reportedly India imposes anti-dumping duty on some steel imports from China for 5 years - press.

- China Commerce Ministry (MOFCOM): Approves some rare earth license export applications; Responds to question on EU rare earths exports [overnight update].

- China PBOC sets Yuan reference rate: 7.0550 v 7.0583 prior (strongest since Sept 30th, 2024).

- China PBOC Open Market Operation (OMO): Injects CNY56B in 7-day Reverse Repos; Net injects CNY36B v injects CNY70B prior (Today's Net based on both 7 and 14-day RRP ops).

- China PBOC Open Market Operation (OMO): Injects CNY100B in 14-day Reverse Repos.

Japan

- Nikkei 225 opens +0.8% at 49,387.

- BANK OF JAPAN (BOJ) RAISES POLICY RATE BY 25BPS TO 0.75%; AS EXPECTED.

- JAPAN NOV NATIONAL CPI Y/Y: 2.9% V 2.9%E; CPI (EX-FRESH FOOD) Y/Y: 3.0% V 3.0%E.

- Japan 2-year JGB yield rises 2.5bp to 1.09%.

- Japan 5-year JGB yields rise 4bps to 1.470%, highest since Jun 2008.

- Japan 10-year JGB yield rises >3bps to 2.00% [highest since May, 2006].

- Japan 20-year JGB yields rise >2bps to fresh record high at 2.964%.

- Financial press article notes ‘rumors’ making the rounds that the Japan Finance Ministry might intervene in the FX market if the BOJ Gov Ueda conveys ‘something dovish’ – published after the Thurs. Tokyo close [update].

- Japan Fin Min Katayama: Affirms will aim to lower the debt-to-GDP ratio steadily; reiterates no divergence in the thinking of the BOJ and gov't.

- Follow up: Japan said to be considering scrapping additional tests for US-made cars - NHK.

- Japan PM Takaichi: Agreed with DPP party (opposition) to lift tax-free ceiling to ¥1.78M from ¥1.60M temporary ceiling [overnight update].

Korea

- Kospi opens +1.5% at 4,055.

- South Korea Nov PPI Y/Y: 1.9% v 1.5% prior.

- Bank of Korea (BOK): Announces temporary measures to boost dollar supply in market from financial institutions - meeting post-BOJ decision.

- South Korea Fin Min Koo Yun-cheol: FX market to stabilize once policy responses materialize [overnight update].

Other Asia

- Malaysia Nov Trade Balance (MYR): 6.1B v 17.7Be.

- Taiwan Central Bank (CBC) Gov Yang: Monetary policy is tight with slight easing bias; Sees room to cut if Section 232 has major economic impact [overnight update].

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

North America

- (US) White House releases the Fri schedule for President Trump: To make an announcement at 1 pm ET, deliver remarks on the economy at 9 pm ET.

- US Senate confirms Selig as CFTC Chair; Confirms Hill as FDIC Chair - financial press.

- (US) Senate Maj Leader Thune: It's possible that Republicans put a healthcare plan in the reconciliation bill.

- *(US) OCT TOTAL NET TIC FLOWS: -$37.3B V $184.3B PRIOR; NET LONG-TERM TIC FLOWS: $17.5B V $173.2B PRIOR

- (CA) Canada Dec CFIB Business Barometer: 55.9 v 55.8 prior.

- (US) White House NEC Dir Hassett: It is appropriate to lower Fed interest rates right now.

- (US) USTR Greer: We have Section 301 as possible tool to deal with EU tech dispute.

- (US) Redfin: U.S. pending home sales fell 5.8% from a year earlier during the four weeks ending December 14, the biggest decline since the start of 2025.

- (US) NOV CPI Y/Y: 2.7% V 3.1%E (slowest pace since July); core 2.6% v 3.0%e (slowest since early 2021).

- (US) DEC PHILADELPHIA FED BUSINESS OUTLOOK: -10.2 V 2.3E; New Orders: +5.0 v -8.6 prior; Prices Paid: 24.3 v 56.1 prior.

- (US) Nov Real Avg Hourly Earning Y/Y: 0.8% v 0.8% prior; Avg Weekly Earnings Y/Y: 0.8% v 0.7% prior.

- (US) INITIAL JOBLESS CLAIMS: 224K V 225KE; CONTINUING CLAIMS: 1.897M V 1.92ME.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: -167 BCF VS. -168 BCF TO -170 BCF INDICATED RANGE.

- (MX) MEXICO CENTRAL BANK (BANXICO) CUTS OVERNIGHT RATE BY 25BPS TO 7.00%; AS EXPECTED; Vote 4-1.

Europe

- (RU) Russia Pres Putin's Envoy Dmitriev: On EU Summit decision (to use debt to loan up to €90B to Ukraine): Major blow to EU warmongers led by failed Ursula - voices of reason in the EU blocked the illegal use of Russian reserves to fund Ukraine – press.

- (EU) Follow up: EC Pres Von der Leyen confirms to delay Mercosur trade deal signing "slightly" - financial press.

- (UR) EU said to be considering to use joint debt to loan up to €90B to Ukraine - financial press- (IE) Ireland Central Bank raises growth forecasts

- (UK) Dec GfK Consumer Confidence: -17 v -18e.

- UK Nov Car Production: 63.1K units – SMMT.

- (PT) Portugal Nov PPI M/M: -0.1% v +0.3% prior; Y/Y: -3.3% v -2.8% prior.

- (TR) Turkey Central Bank (CBRT) Dec Minutes: Nov inflation lower on food prices.

- (UK) BANK OF ENGLAND (BOE) CUTS BANK RATE BY 25BPS TO 3.75%; AS EXPECTED; Vote 5-4 (Bailey, Breeden, Dhingra, Ramsden and Taylor voted for cut); Path for bank rate cannot be pre-judged with precision, sees "more limited space" as bank rate nears neutral; Seen around 3%.

- (EU) ECB LEAVES KEY RATE UNCHANGED; AS EXPECTED; Reiterates not-committing to any rate path; Raises GDP and Core Inflation forecasts.

- (CZ) CZECH CENTRAL BANK (CNB) LEAVES 2-WEEK REPURCHASE RATE UNCHANGED AT 3.50%; AS EXPECTED.

- (EU) ECB Chief Lagarde: Decision to keep rates steady was unanimous; ECB is in a good place on interest rates; Not offering any forward guidance - Q&A.

Levels as of 01:20 ET

- Nikkei 225 +1.3%; ASX 200 +0.5%; Hang Seng +0.5%; Shanghai Composite +0.5%; Kospi +1.1%.

- Equity S&P500 Futures flat; Nasdaq100 +0.1%; DAX -0.3%; FTSE100 +0.1%.

- EUR 1.1713.117.63; JPY 155.50-156.17; AUD 0.6605-0.6623; NZD 0.5759-5784.

- Gold -0.4% at $4,347/oz; BTC +0.4% at $86,884; Crude Oil -0.3% at $55.85/bbl; Copper +0.8% at $5.4703/lb.