JP equities continue to new heights as Takaichi plans new gov

Asia Market Update: JP equities continue to new heights as Takaichi plans new govt; JPY yield curve flattens after well supported 30-year JGB auction; US govt shutdown no end in sight.

General trend and developments

- Just Australia and Japan the major indices open during Asian trading today (Kospi, Hang Seng and Shanghai all closed for holidays). Japan’s benchmark 225 index initially up as much as 1.1% to fresh record highs, on top of yesterday’s stellar 4.7% gains in response to the reflationist Takaichi winning the LDP leadership race. Pared most gains to be +0.4%. USD/JPY ticked higher still to edge out yesterday’s two-month highs, touching 150.62. BOJ rate hike chances for this month plunged to 23.5% vs 55% Friday, while still retaining a 56.0% chance in December vs 76.5% Friday.

- Outgoing Japan Fin Min Kato reiterated that currencies should move stably, following the USD/JPY breaking back up above 150.50 for first time since end-July.

- Still waiting for Japan PM-elect Takaichi’s crucial pick for Finance Minister. Sources say Motegi expected to be named as Foreign Minister, Koizumi and Kobayashi were expected to receive cabinet roles. Meanwhile, Takaichi posted on X that she was “Truly hoping to work together with Pres Trump to make our alliance even stronger and more prosperous, and a free and open Indo-Pacific".

- Politically, Takachi has her work cut out for her even before she takes power as PM in a minority government (expected Oct 17th), as the current LDP coalition partner Komeito has expressed doubts about continuing in such a role while today the head of the DPP, Tamaki, denied reports of meeting with Takaichi yesterday and said he was not interested in a cabinet post.

- Prior to the 30-year JGB auction, Japan 30-year JGB yields rose 4.5bps to 3.34% (all-time high), amid Japan’s August household spending double what was expected. Although not as steep as yesterday’s 13-14bp rise at the long-end, unlike yesterday today the front end of the curve also rose, with 2-yr and 5-yr yields +1.5-2bps. However, the 30-year JGB auction itself came in at a healthy 3.41x bid-to-cover and average yield lower than both the 12-month average as well as last month’s prior auction. Yield curve flattened back at the long-end to even below opening levels following the auction, with 30-yr yields now -3.5bps back down to 3.25%.

- Japan’s Total Reserve Assets reached a new record-high $1.34T during September.

- Ahead of the New Zealand RBNZ rate decision tomorrow (expected to cut another 25bps), NZIER’s Quarterly Business survey saw business expectations fall further during the third quarter, citing cautious hiring, investment and overall cost and pricing.

- A major fire at a Ford (and other US auto makers’) supplier, Novelis, will disrupt business for "months" to come; Novelis supplies ~40% of US auto-grade aluminum sheets; Ford (at minimum) likely to flag implications for earnings.

- Republicans and Democrats seemed to be settling in for the long haul with US House Speaker Johnson saying it was doubtful the government shutdown would end this week.

- Taiwan Semi's (TSMC) monthly sales for Sept tomorrow.

- US equity FUTs slightly down during Asia trading.

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

- Wed Oct 9th RBNZ Rate Decision, (Wed night FOMC Minutes).

- Fri Oct 10th NZ Sept Biz PMI, (Fri night US Oct Michigan Consumer Sentiment).

Holidays in Asia this week

- Mon Oct 6th China, South Korea, Taiwan.

- Tue Oct 7th China, Hong Kong, South Korea.

- Wed Oct 8th China, South Korea.

- Thu Oct 9th South Korea.

- Fri Oct 10th Taiwan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 8,977.

- Australia Oct Westpac Consumer Confidence: 92.1 v 95.4 prior.

- Australia Sept ANZ-Indeed Job Advertisements M/M: -3.3% v -0.3% prior.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 85.1 v 86.3 prior.

- NZIER: NZ Quarterly Business Opinion Survey: Business Expectations 18% v 22% q/q.

- RBNZ establishes a new Financial Policy Committee (FPC) to make decisions for financial stability; Subject to oversight by the full RBNZ board; Expects to be operational in early 2026.

China/Hong Kong

- Hang Seng closed for holiday; Shanghai Composite closed for holiday.

- China Sept foreign reserves: $3.339T V $3.322T prior.

- (US) White House Crypto Czar Sacks: The AMD/OpenAI deal shows that the AI market is booming and competitive; Sees strong argument for not selling to China the latest in AI chips, but notes that there is a case for selling China 'depreciated' AI chips [overnight update].

- (NG) Nigeria reportedly in discussion with China for a $2B loan to build out a new power grid – press [overnight update].

Japan

- Nikkei 225 opens +0.7% at 48,271 (fresh record high).

- Japan Aug Household Spending Y/Y: 2.3% v 1.2%e.

- Japan Sept Total Reserve Assets: $1.34T v $1.32T prior (Highest on record).

- Japan sells ¥700B VS. ¥700B indicated in 30-yearJGB bonds; AVG yield: 3.248% V 3.624% prior; bid-to-cover: 3.41X V 3.31X prior.

- Japan DPP Head Tamaki (opposition party); Denies media reports saying that he met with LDP President Takaichi yesterday - press.

- Japan PM-elect Takaichi: Truly hoping to work together with Pres Trump to make our alliance even stronger and more prosperous; Will work with Trump on a free and open Indo-Pacific - X post.

- Japan Outgoing Fin Min Kato: Reiterates that it's important for currencies to move in stable manner reflecting fundamentals; We'll closely watch any excessive FX moves in the market.

- Japan 30-year JGB yields rise 3bps to 3.315% (all-time high).

- Japan PM-elect Takaichi makes various LDP party appointments.

- Japan LDP ruling party to delay extraordinary diet session to Oct 17th – press.

- Japan Chef Cabinet Sec Hayashi: Aware of Trump's comments on truck tariffs; To assess details once clarified and respond appropriately.

Korea

- Kospi closed for holiday.

- China Premier Li Qiang: To visit North Korea from Oct 9-11 - MOFA.

Other Asia

- Indonesia Econ Min Hartarto: Indonesia drafting a bilateral deal with the US - financial press.

- Philippines Sept CPI M/M: 0.0% v 0.2%e; Y/Y: 1.7% v 1.9%e.

- (IN) Reportedly India seeks LPG and crude from US - press.

North America

- (US) House Speaker Johnson: Doubtful the govt shutdown ends this week - US press interview.

- *Reportedly fire at a major Ford and other auto co supplier, Novelis, will disrupt business for months; Novelis supplies ~40% of US auto-grade aluminum sheet; Ford will likely flag potential implications when it reports earnings - WSJ.

- (US) Fed's Schmid (voter in 2025; non-voter in 2026; hawk): Instant payments probably leapfrog stable coin - Q&A.

- (US) Fed's Schmid (voter in 2025; non-voter in 2026; hawk): Labor market is cooling, but remains healthy; Expects tariffs to have a muted effect on inflation; Inflation is too high and it's worrying that a rise in prices are widespread.

- (US) Adobe: US Holiday Shopping Season to Cross $250 Billion Online, Rising 5.3% YoY.

- US Pres Trump: Beginning November 1st, 2025, all Medium and Heavy Duty Trucks coming into the United States from other countries will be tariffed at the rate of 25% - Truth Social post.

- (BR) Brazil Fin Min Haddad: Trump and Lula call was 'positive;' Official statement will be released later.

- (US) Reportedly Treasury Secretary Bessent to remain as IRS commissioner after filling role on temporary basis; Frank Bisignano to be named IRS CEO - CNBC.

- (US) House Speaker Johnson: There's nothing for the House to negotiate on stopgap funding; GOP will disclose many ideas for healthcare in the coming months.

- (CA) Canada PM Carney: Canada economic and fiscal update to be published in spring 2026 following autumn 2025 budget; Releasing new definitions of capital and operating spending are coming; Govt will release budget in the autumn of the year going forward from this year.

- (BR) US Pres Trump: Had a very good telephone call with President Lula, of Brazil; Discussed the economy and trade - Truth Social post.

- (US) Transportation Sec Duffy: The Govt shutdown has put way more stress on air traffic controllers.

- (US) US Pres Trump: Beginning November 1st, 2025, all Medium and Heavy Duty Trucks coming into the United States from other countries will be tariffed at the rate of 25%

- Truth Social post.

- (US) President Trump: Would like to see a deal make with Dems on healthcare; Negotiations are happening.

- US FAA: Air traffic control staffing issues are impacting flights at numerous airports, incl Newark, Phoenix, and Denver.

Europe

- (ES) ECB's Escriva (Spain): Level of rates are adequate as we are at target and expect to remain there for years; Expect a solid Q3.

- (RU) Reportedly Russia refinery Kirishi (capacity 400K bpd) halts CDU-6 after drone strike; Repairs could last one month - press.

- (FR) France's Fin Min Le Maire: Will step down from new Govt; Hopes that France can form a new Govt following his departure.

- (FR) France Pres Macron asked outgoing PM Lecornu to continue final talks with political parties to stabilize French political scene - French press.

- (EU) ECB Pres Lagarde: Disinflationary process is over; Sluggish exports and strong euro will hold economy back - comments to European Parliament.

- (EU) European Commission to propose 50% tariffs on worldwide steel imports that exceed quota set in 2013 (~18.3Mt) - press.

Levels as of 01:20 ET

- Nikkei 225 +0.4%, ASX 200 -0.3%, Hang Seng closed; Shanghai Composite closed; Kospi closed.

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

- EUR 1.1689-1.1717; JPY 150.24-150.62; AUD 0.6604-0.6625; NZD 0.5821-5843.

- Gold +0.2% at $3,986/oz; BTC +0.7% at $124,470; Crude Oil +0.1% at $61.75bbl; Copper +0.9% at $5.0830/lb.