JP PM Takaichi confirms snap election, JP equities up, Yen down - despite jump in JGB yields

Asia Market Update: JP PM Takaichi confirms snap election; JP equities up, Yen down - despite jump in JGB yields; Focus on US Dec CPI.

General trend and developments

-Nikkei outperformed and jumped up as much as 4% at its best to fresh all-time highs after yesterday’s holiday, in spite of significantly higher yields that in turn belied a much weaker Yen (158.90 saw new one-year lows) amid a ~$3.7B option expiration in focus for Jan 16th with a strike price of ¥160 and amid traders betting an early Feb election might see PM Takaichi’s LDP party win a majority once more in the Lower House. Fin Min Katayama said she informed US Treas Sec Bessent of her concerns about the “one-sided” weakening of the Yen. Pound Sterling vs Yen also rose to levels not seen since pre-GFC in Aug 2008, while Euro and Swissie both rose to record highs.

-The ‘Takaichi trade’ is back on as Japan PM today indeed confirmed plans to hold early elections with a dissolution of the Lower House on Jan 23rd, enabling an election as soon as Feb 8th and no later than 40 days; JGB yields and Nikkei higher, Yen halts decline, for now.

-Could Yen weakness and early elections lead to sooner BOJ rate hike action?; Former BOJ official Sakurai said the weak Yen may 'spur' BOJ rate hike in Apr - US financial press.
-JP officials finally resume verbal intervention in 2026.

-Healthy Japanese macro data with bank lending exceeding expectations along with Nov current account & trade balance both exceeding the surpluses forecast.

.-Korea’s Kospi also saw fresh highs as the Korean Won weakened, heading for the longest losing streak of 9 sessions vs USD since 2008. Comes as local investors continue to channel funds abroad and concerns about Korea’s upcoming investments into the US as part of its trade deal.

-Some analysts expect KRW weakness to continue in Feb, citing a poll of 100 bond experts.

-Australia Consumer Confidence in January fell further on the low side, with consumers said to be wary of recent RBA messaging that rate hikes may not be far away.

-Trump reportedly being steered by senior Aides and officials towards a diplomatic solution for Iran rather than strikes as protests head into a third week.

-Reportedly US and Taiwan near a trade deal, which would include TSMC pledge to build more manufacturing in the US in return for lowering tariffs on Taiwanese imports to 15%.

-Nvidia’s Powell at JPMorgan’s Healthcare Conference said “Agentic AI is here—alive and being deployed faster in healthcare than any other industry”. Follows yesterday’s announcement of a $1B investment by Nvidia in Eli Lllly for an AI drug lab.

- Chinese EV firms outperform: China issued progress of China-EU consultations on EV; Reached agreement with EU on EV prices arrangement.

NOTE (US) The Senate bipartisan negotiated Market Structure bill text for the US crypto industry has been released; includes text for yields on stablecoins. Most-used Stablecoin platform Ethereum outperforming Bitcoin, +1.4% on the news.

- US equity FUTs -0.1% to -0.3% during Asian trading.

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

- Tue Jan 13th (Tue night US Dec CPI).

- Wed Jan 14th CN Dec Trade Balance, JP 5-year JGBs, (Wed night US Oct & Nov PPI, US Nov Retail Sales, US Dec Existing Home Sales).

- Thu Jan 15th KR BOK Rate Decision, UK Nov GDP.

- Fri Jan 16th KR Dec Unemployment, JP Liquidity Enhancement Auction.

Holidays in Asia this week

- Mon Jan 12th Japan.

- Fri Jan 16th Indonesia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.4% at 8,790.

- Australia Jan Westpac Consumer Confidence Index: 92.9 v 94.5 prior. Australia sells A$300M v A$300M indicated in 4.75% Jun 2054 Bonds: Avg Yield: 5.1953%; bid-to-cover: 2.34x.

-New Zealand NZIER Business Opinion Survey: Q4 Business Confidence: 48.0% v 18.0% prior - update.

- RBNZ appoints Heidi Richards and Prassanna |Gai as external members of Financial Policy Committee - statement.

China/Hong Kong

-Hang Seng opens +1.3% at 26,958; Shanghai Composite opens +0.1% at 4,169.

-Nvdia: We do NOT require upfront payment [responds to financial press article on H200 chips].

-China said to be scrutinizing how Jane Street Group and other Foreign firms are participating in its EFF market - US financial press.

-China opposes unilateral sanctions and "long-arm jurisdiction", in reference to Iran 25% secondary tariffs imposition by Pres Trump - US financial press.

- Canada officials: Fair to expect progress on canola tariffs but not to definitively eliminate them during China visit.

-China Vanke: Reportedly dollar bondholders asked to call default by advisory firm - press [overnight update].

-China onshore A-shares daily turnover rises above CNY3.5T (~$516B), record high [overnight update].

- China President Xi: Need to maintain high pressure against corruption [overnight update].

-China PBOC sets Yuan reference rate: 7.0103 v 7.0108 prior (strongest since Sept 30th, 2024).

-China PBOC Open Market Operation (OMO): Injects CNY359B; Net injects CNY342B v injects CNY36B prior.

Japan

-Nikkei 225 opens +1.7% at 52,808 after holiday on Mon.

-Japan Dec Bank Lending Y/Y: 4.4% v 4.2% prior.

-Japan Nov Current Account Balance: ¥3.7T v ¥3.609Te.

-Japan Dec Eco Watchers Current Survey: 48.6 v 49.0e.

-JAPAN PM TAKAICHI CONFIRMS INTENT TO HOLD SNAP ELECTIONS; To dissolve Lower House at beginning of session on Jan 23rd (Fri), 2026 [the same day as the next BOJ rate decision] - Kyodo.

-Japan Fin Min Katayama: Have told US Treasury Sec Bessent on Japan concerns over one-sided decline in Yen.

-Japan begins trial to explore mining deep-sea rare earths - Semafor.

-USD/JPY Japanese Yen falls to one-year low against USD 158.25 at amid ~$3.7B option expiration in focus for Jan 16th; the strike price is ¥160 - financial press.

-Former BOJ official Sakurai says weak Yen may 'spur' BOJ rate hike in Apr - US financial press.

-Japan Defense Min Koizumi: Reiterates the US and Japan are the strongest allies in the world; reiterates Japan is committed to increasing defense spending.

-Japan Dep Chief Cabinet Sec Ozaki: Refrains comment on potential snap election; Reiterates seeing rapid, one-sided moves in FX market.

- Japan Defense Chief Koizumi to visit the US from Jan 12 - Press.

-HSBC upgrades Japan stocks from Underweight to Neutral [overnight update].

Korea

-Kospi opens +0.8% at 4,662

-Korean Won (KRW) is expected to weaken further in Feb; cites poll of 100 bond experts - Yonhap.

-Hynix to invest an additional KRW19.0T on chip packaging facilities in South Korea - Press.

- Follow up: South Korea said to be considering FX stabilisation bonds as early as Jan to 'beef up' FX reserves - Fin Min official.

Other Asia

- (IN) Major US financial press outlet to keep India bonds review "open and ongoing" for Index - financial press.

- Taiwan Office of Trade Negotiations: Reaches 'some' consensus with the US on trade deal; plans to announce main trade agreement after meeting concludes.

-Reportedly US and Taiwan near a trade deal, which would include TSMC pledge to build more manufacturing in the US in return for lowering tariffs on Taiwanese imports to 15% - NY Times.

-Taiwan Finance Ministry: State-own national stabilization fund to end interventions to stabilize Taiwan stock market, effective immediately [overnight update].

- INDIA DEC CPI Y/Y: 1.3% V 1.6%E [overnight update].

North America

-(US) The bipartisan negotiated Market Structure bill text (for the US crypto industry) has been released; the measure includes stablecoin yield text - US financial press.

-US Attorney for DC Pirro: US Attorney's Office contacted Fed 'multiple times' (prior to criminal investigation against Fed Chair Powell); Outreach on cost overruns were ignored - post on X.

- President Trump: To have 'much' to announce in the coming weeks on data centers.

-NY Fed President Williams: Markets are not sure what is going to happen with Fed independence.

- US Fed's Williams (voter): Cuts have brought risks into better balance; Tariff impacts should fade in 2026; Inflation to peak during H1 2026.

-(US) CMS: Announces approval of drug price negotiation for initial price applicability year 2028; will announce drugs selected for renegotiation, if any, by no later than February 1, 2026.

-(IR) US Pres Trump said to be considering Iran's offer for diplomacy surrounding its nuclear program; VP Vance and other senior officials urging Trump to try diplomacy - WSJ.

- (US) Trump administration is taking a $150M equity stake to build the US’s only big producer of gallium Atlantic Alumina Co., or ATALCO - press.

- US FHFA Dir Pulte: IPO of Fannie Mae and Freddie Mack remain on the table; worth between $0.5-1.0T.

- (US) White House NEC Dir Hassett: Large cost overruns look inconsistent with Powell testimony.

- (US) Pres Trump said to interview Rieder for Fed Chair this week - Fox.

- (US) TREASURY'S $58B 3-YEAR NOTE AUCTION RESULTS: DRAWS 3.609% V 3.614% PRIOR; BTC 2.65 V 2.64 PRIOR AND 2.64 OVER THE LAST 9 AUCTIONS.

- (US) US Senator Murkowski (R-AK): After talking with Fed Chair Powell this morning, it's clear that the Administration's investigation is nothing more than a coercion attempt - X post.

- (US) TREASURY'S $39B 10-YEAR NOTE REOPENING DRAWS 4.173% V 4.175% PRIOR; BID-TO-COVER RATIO: 2.55 V 2.55 PRIOR AND 2.59 OVER LAST 8 REOPENINGS.

- (US) Pres Trump: Tariff rebates would be many billions from Supreme Court ruling on tariffs; When these Investments are added, we are talking about Trillions; If Supreme Court rules against White House, we're screwed - Truth Social post.

- (US) Reportedly US Treasury Sec Bessent told Pres Trump that the DOJ's Fed Chair Powell investigation creates a mess and may be bad for financial markets - Axios.

Europe

-(IE) Ireland Dec Construction PMI: 48.4 v 46.7 prior.

-(UK) Dec BRC Like-For-Like Y/Y: Sales Y/Y: 1.0% v 1.2% prior.

-(IR) US Pres Trump: Effective immediately, placing 25% secondary tariffs countries doing business with Iran - Truth Social.

- (DE) Germany Nov Current Account Balance: €15.1B v €14.8B prior.

- Reportedly BHP is not planning bid for Glencore as Rio Tinto talks continue - press.

- (EU) ECB’s Villeroy (France): One does not change a willing monetary policy; We've won the battle against inflation; ECB shouldn't change a winning.

- Reportedly US and Taiwan near a trade deal, which would include TSMC pledge to build more manufacturing in the US in return for lowering tariffs on Taiwanese imports to 15% - NY Times.

Levels as of 01:20 ET

- Nikkei 225 +3.3%; ASX 200 +0.7%; Hang Seng +0.8%; Shanghai Composite -0.1%; Kospi +0.6%.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.3%; DAX +0.2; FTSE100 -0.1%.

- EUR 1.1656.116.71; JPY 157.90-158.91; AUD 0.6707-0.6717; NZD 0.5771-5780.

- Gold -0.2% at $4,604/oz; BTC flat at $91,980, Crude Oil +0.7% at $59.71/bbl; Copper +0.2% at $6.0170/lb.