BoJ delivers dovish rate hike ahead of long JP holiday

Asia Market Update: BOJ delivers dovish rate hike ahead of long JP holiday [Sept 21-23rd], Nikkei rises; Ueda awaited for further direction [6:30 GMT]; Bessent is due to meet China Vice Premier He Lifeng in NY on Sun; CNY extends rally.

General trend and developments

-The Yen initially weakened and the Nikkei extended gains after 2 BOJ board members favored unchanged rates. Wednesday’s US Fed rate hike was, conversely, characterized as hawkish. Gains in longer-dated JGBs were later pared, as the BOJ statement did not comment on bond market volatility. Previously some were, also, concerned about whether the BOJ might fall behind the curve on inflation. Even still, the central bank’s statement reinforced the trend of global CBs prioritizing inflation. Ahead of today’s decision, OIS had indicated there is a chance for further BOJ rate hikes in 2026. Ueda’s upcoming press conference might shed more light on this topic. The BOJ has 2 remaining meetings in 2026 [Oct, Dec]

-CNH rallies as the PBOC continues to strengthen the Yuan ahead of the expected Sept Trump/Xi summit. Positive trade signs have, also, appeared. The US will reportedly delay excess manufacturing capacity tariffs until after the Xi Summit, according to a recent financial press report.

- Another focal point has been the fragile trade truce between the US and China. Recall, Chinese executives may join President Xi's US trip, according to the SCMP [Aug 28th]. This comes as the two sides prepare to extend a one-year trade agreement reached in Busan [South Korea] last October 2025, said the newspaper.

-PBOC elects to use 14-day tool ahead of early Oct Chinese holidays.

-Chinese pharma names supported by the 5-year plan disclosure: China released the 15th 5-year plan related to the development of the pharmaceutical industry which targets CNY3.5T in pharma industry revenue by 2030.

-Analysts price in additional RBA tightening amid hawkish comments from Bullock and Hauser.

-Asian officials continue to comment on bond market volatility: RBA Gov Bullock said global bond yield rise has not been disorderly. Indonesia’s Fin Min Nazara said the domestic bond market is 'solid' amid global uncertainty.

-APAC governments continue to address the renewed rise in oil prices. South Korea Finance Ministry extended the fuel-tax cuts by an additional 2 months until Nov.

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

-Sat Sep 19th: ECOFIN Meetings.

-Japan markets are closed for holiday Sept 21-23rd.

Headlines/economic data

Australia/New Zealand

-ASX 200 Index opens +0.4%a t 8,763.

-RBA Gov Bullock: Developments suggest growth in the domestic economy is slowing, some upside risks to inflation appear to be materializing; Global bond yield rise has not been disorderly.

- RBA Deputy Gov Hauser [formerly of the BOE]: Thinks we are closer to normal level of global interest rates.

- Australia sells A$1.0B v A$1.0B indicated in 1.00% Nov 2031 bonds; Avg Yield: 4.9936 v 4.631% prior; bid-to-cover: 4.47x v 3.63x prior.

- New Zealand Foreign Ministry Spokesperson: There have been NO discussions with the EU about NZ becoming an 'associate member' [follows recent news related to Canada].

-New Zealand Aug Trade Balance (NZD): -1.3B v -1.9B prior.

-New Zealand Aug Food Prices M/M: 0.3% v 0.1% prior.

- New Zealand Aug Adj Job Ads M/M: +5.3% v -2.9% prior - Bank of New Zealand [private bank].

-Qantas [QAN.AU] 'Hundreds' of Qantas ground workers to strike next week over pay concerns; cites union - Press.

China/Hong Kong

-Hang Seng Index opens +0.5% at 24,723.

- Shanghai Composite Index opens +0.4% at 3,891.

- (CN) China PBOC sets the yuan mid-point at 6.7521 v 6.7580 prior [continues to fix CNY at the strongest level since Feb 3rd 2023].

- China PBOC Open Market Operation (OMO): Sells CNY463.3B in 7-day Reverse Repos; Sells CNY100B in 14-day reverse repos; Net drains CNY40.7B v injects CNY159B prior.

- CHINA REPORTEDLY PRIVATELY ASKS IRAN TO HELP CURB HOUTHIS - PRESS.

- (US) The US will reportedly delay excess manufacturing capacity tariffs until after the Xi Summit - financial press.

-China Commerce Ministry (MOFCOM): US-China economic teams in talks regarding tariffs [EU market close].

- China Foreign Min Wang Yi held a phone call with US Secretary of State Rubio before Xi visists the US - SCMP.

- China and US may unveil measures to boost military ties - SCMP.

-China Commerce Ministry said to hold video talk with EU trade officials [EU market close].

- China releases 15th 5-year plan related to the development of the pharmaceutical industry; targets CNY3.5T in pharma industry revenue by 2030.

-China cities roll out new EV subsidies to improve demand - Chinese press.

- Chinese banks accelerate bond offerings to optimize debt mix - Chinese pres.

-China NEA: To stabilize coal output and supply; to release coal capacity reserves as needed; to steadily promote full production of coal capacity.

-Hong Kong Aug Unemployment Rate: 3.8% v 3.7%e [EU market close].

-Xiaomi [1810.HK]: Reportedly Xiaomi and Innolight execs likely to join China Pres Xi during his US visit - SCMP.

Japan

-Nikkei 225 Index opens +0.8% at 64,651.

- BANK OF JAPAN (BOJ) RAISES TARGET RATE BY 25BPS TO 1.25%; AS EXPECTED; Vote to hike by 25bps was 7-2 (Sato and Asada dissented for steady rates); Will consider the timing and pace of adjustment, while examining the likelihood of realizing the baseline scenario; CPI is likely to accelerate ‘clearly’ above 2% during H2 of FY26; inflation trend is getting closer to target; there is risk inflation will ‘deviate’ above the price target; Must be ‘vigilant’ to risks; Price pressures in ‘B-to’B’ trade is spreading to CPI; The perspective of stabilizing underlying CPI inflation at a level around 2 percent becomes important.

-JAPAN AUG NATIONAL CPI Y/Y: 1.9% V 2.0%E; CPI (EX-FRESH FOOD) Y/Y: 1.7% V 1.8%E.

- Japan PM Takaichi said to be arranging to meet President Trump during week of Sept 21st.

- Japan refiners say they are on track to secure 'enough' oil for Nov - press.

-Honda [7267.JP] Plans to move up production of next-gen hybrids - Nikkei.

- Japan Chief Cabinet Sec Kihara: Reiterates to 'visibly' step up Japan 'doge efforts' on budget reform.

-Japan PM Takaichi: Will accelerate policy to achieve strong economic growth under a proactive fiscal policy.

- Japan Banking Lobby Chairman Kato: JGB yields are likely to rise further.

-Japan and US discussing chip factory construction as part of $550B investment talks - Nikkei.

Korea

-Kospi Index opens +2.5% at 6,885.

-South Korea Aug PPI Y/Y: 7.9% v 7.7% prior.

- US Secretary of State Rubio to meet with South Korea Foreign Min on Friday at 9:30 AM ET.

- South Korea President Lee: Admits has 'fallen short'; have never considered seeking another term.

- South Korea Finance Ministry: Extends the fuel-tax cuts by an additional 2 months until Nov.

Other Asia

-(TW) Taiwan Central Bank (CBC) left the Benchmark Interest Rate unchanged at 2.00% (as expected) [EU market close].

-(TW) Taiwan Central Bank Policy Statement noted that the current inflation level remained mild and that steady rates to help maintain stable economic and financial development. Saw 2027 growing stably aided by exports [EU market close].

North America

- (US) Reportedly US President Trump and Mexican President Sheinbaum are close on reaching a trade agreement after phone conversation yesterday - Politico.

- (US) White House issues Trump's schedule for Fri: Trump to travel to Camp David on Fri; Trump to also make an announcement on healthcare at 2:30 PM ET on Fri.

-(US) INITIAL JOBLESS CLAIMS: 196K V 207KE; CONTINUING CLAIMS: 1.73M V 1.78ME [US market close].

-(US) WEEKLY EIA NATURAL GAS INVENTORIES: +44 BCF VS. +48 BCF TO +50 BCF INDICATED RANGE [US market close].

-(US) AUG HOUSING STARTS: 1.275M V 1.320ME; BUILDING PERMITS: 1,394M V 1.408ME [US market close].

-(US) AUG PENDING HOME SALES M/M: 0.3% V -0.1%E; Y/Y: -4.9% V -3.9%E [US market close].

-(US) SEPT PHILADELPHIA FED BUSINESS OUTLOOK: 37.8 V 32.1E [US market close].

-NVDA CEO Huang: Nvidia to sell twice as many chips next year as in 2026.

Europe

-(UK) BANK OF ENGLAND (BOE) LEAVES BANK RATE UNCHANGED AT 3.75%; AS EXPECTED [EU market close].

-(UK) BANK OF ENGLAND (BOE) SEPT MINUTES: VOTED 6-3 TO KEEP POLICY STEADY [EU market close].

-(UK) BOE PLANS TO REDUCE QT PACE FROM £70B TO £46B V £50BE (unanimous vote OF 9-0); APF Gilts auctions will be paused until April 2027; Scraps long-end Gilt sales in plan to unwind QE by 2034; Plans to cut £368B of Gilt stock by end of 2034 [EU market close].

-(EU) Euro Zone Aug Final CPI Y/Y: 3.2% v 3.3% prelim; CPI Core Y/Y: 2.4% v 2.4% prelim [EU market close].

-(EU) ECB's Makhlouf (Ireland): Reiterated stance of not seeing signs 2nd round effects. Markets did understand its commitment to its inflation target. Every meeting was live due to uncertainty as inflation risks were to the upside [EU market close].

-(CH) Swiss SECO (Govt) Autumn Economic Forecasts raised the 2026 GDP growth forecast from 0.9% to 1.7% while maintaining 2027 GDP growth forecast at 1.6%. Seco maintained both 2026 and 2027 CPI forecasts at 0.6% [EU market close].

-(CH) Swiss Aug Trade Balance (CHF): 3.8B v 5.7B prior; Real Exports M/M:-8.6% v +11.2% prior; Real Imports M/M: -3.1% v -1.5% prior; Watch Exports Y/Y: 9.1% v 9.6% prior [EU market close].

-(ES) Spain Q2 Labor Costs Y/Y: 4.0% v 4.9% prior [EU market close].

-(SE) Sweden Aug PES Unemployment Rate: 3.8% v 3.8% prior [EU market close].

-(NL) Netherlands Aug Unemployment Rate: 4.0% v 4.0% prior [EU market close].

-(AT) Austria Aug Final CPI M/M: 0.6% v 0.6% prelim; Y/Y: 3.2% v 3.2% prelim [EU market close].

-(ZA) South Africa Q3 BER Consumer Confidence: -13 v -19 prior [EU market close].

-(US) Pres. Trump: Major progress made on establishing US Army base in Poland.

Middle East

-(IR) IRGC Navy: Targeted Togo-flagged oil tanker after it 'illegally tried to pass through the Strait of Hormuz;' Tanker 'immediately caught fire'.

-Pakistan Army Chief urges Iran to restrain the Yemen Houthis - FT.

- Strait of Hormuz traffic at 4 vessels on Thursday v 6 prior; cites shipping data – financial press.

Levels as of 01:20 ET

Nikkei 225 +1.8%; ASX 200 -0.1%; Hang Seng +0.7%; Shanghai Composite +1%; Kospi +2.7%.

Equity S&P500 Futures +0.2%; Nasdaq100 +0.2; DAX -0.4%; FTSE100 +0.1%.

EUR 1.1492-1.1474; JPY 157.20-155.88; AUD 0.7136-0.7108; NZD 0.5788-0.5715.

Gold +0.2% at $4,407/oz; BTC +1.5 at $77,494; WTI Crude Oil -0.8% at $101.07/bbl; Copper +0.3% at $6.6358/lbs.