JP fresh market outlook continues following Takaichi’s win, stronger USD/JPY

Asia Market Update: JP fresh market outlook continues following Takaichi’s win; Stronger USD/JPY, less chance of Oct BOJ hike, amid soft JP labor market data; RNBZ slashes 50bps, still room for more.

General trend and developments

- Profit-taking at record highs saw Nikkei 225 flat to slightly down as Japan’s new market outlook continued post-Takaichi’s LDP leadership victory in the weekend.

- USD/JPY up as much as 80 pips to mid-Feb levels post-Japan’s soft wage data. Labor Cash earnings for August missing downward across the board, with Real Cash Earnings seeing its 8th consecutive monthly decline. Some analysts saw this as extra reason for PM-elect Takaichi to attempt to delay BOJ rate hikes for now, while others simply blamed the miss on the end of the temporary boost from summer bonuses and a higher base number from the prior year. Takaichi herself purported to be open to a hike early in 2026 and her economic advisor Etsuro Honda seeing no problem with a December hike.

- Last night’s OIS chances of an October rate hike by the BOJ seemed to anticipate Takaichi’s likely rate hike stance, falling further to 21% (vs 23.5% Monday) but the chances of a December hike actually firming up to 65.5% (vs 56% Monday)

- A further flattening of the Japanese yield curve today following Monday’s sharp steepening, with the front-end +2-3bps but the long-end flat to slightly down.

- Foreigners looked to have somewhat missed out on the recent surge Japanese equities to record highs, having sold a net ¥3.73T in Japan stocks during September.

- Japan Aug Current Account Balance for Aug also came in high, leading to the second-highest level for any half-year period since comparable data became available in 1985.

- NZ 2-year yields flat and Kiwi dollar at day’s lows but steady ahead of the RBNZ OCR rate decision, then fell -7bps after the RBNZ unexpectedly cut the OCR by a further 50bps, when only 25bps was expected. New OCR of 2.50% [lowest in three years] now below even the prior anticipated terminal rate of 2.55% at just the last decision. Just as significantly, the Monetary Policy Committee indicated it is open to further rate reductions as required. Kiwi fell -0.8% immediately to its lowest since April 11th, just after the US tariff shock. Later fell further to -1.0%

- Price action for NZ 2-year yield suggested some had already expected the 50bp cut, such as several of the NZIER shadow-board members back on Monday and Kiwibank back on Sept 22nd, with ANZ now calling for a further cut to 2.25% in Nov; Note that NZ saw a gradual move lower in yields as opposed to a sharp gap down.

- Hang Seng underperformed -1.1% after yesterday’s holiday with Shanghai and Kospi still closed for extended holidays (China mainland markets return tomorrow).

- Early signs towards the end of the Golden Week holidays in China not encouraging in terms of spending, with lots of trips taken but tourism showing 'little sign of a spending splurge'.

- Spot Gold trades above $4,000/oz for the first time.

- US equity FUTs +0.1% to +0.2% during Asia trading.

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

- Wed Oct 9th (Wed night FOMC Minutes).

- Fri Oct 10th NZ Sept Biz PMI, (Fri night 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 -0.1% at 8,948.

- Australia sells A$1.2B v A$1.2B indicated in 4.25% Mar 2036 bonds, Avg Yield: 4.3788% v 4.4148% prior, bid to cover 3.49x v 3.26x prior.

- Australia PM Albanese: To boost economic and defense partnership with Singapore.

- NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE (OCR) BY 50BPS TO 2.50%; MORE-THAN-EXPECTED.

- New Zealand 2-year yield immediately fell by 4.5bps to 2.68% after larger than expected RBNZ rate cut; NZD/USD -0.8%.

China/Hong Kong

- Hang Seng reopens -0.2% at 26,900; Shanghai Composite remains closed for holiday [reopens tomorrow, Oct 9th].

- Tourism during China's Golden Week said to show 'little sign of spending splurge' – FT.

- Follow Up: US lawmakers push expanded chip export curbs on China - SCMP.

- US House Select Committee on the CCP releases report: 'How the CCP Gets its Key Equipment for Making Semiconductors from U.S., Dutch, and Japanese Companies'.

- WTO: Raises 2025 trade forecast and lowers 2026 outlook to +0.5% y/y (prior: +1.8% y/y); Global trade to be stronger than expected due to AI uptake and softer tariff impact.

- OpenAI: Suspected China govt representatives used ChatGPT to formulate mass surveillance proposals - CNN.

- World Bank raises China 2025 GDP growth from 4.2% to 4.8%- biannual economic outlook for East Asia and the Pacific region [overnight update].

Japan

- Nikkei 225 opens -0.1% at 47,894.

- JAPAN AUG LABOR CASH EARNINGS Y/Y: 1.5% V 2.7%E; Real Cash Earnings Y/Y: -1.4% v -0.5%e (8th consecutive monthly decline).

- Japan Aug Current Account Balance: ¥3.776T v ¥3.506Te (second-highest level for any half-year period since comparable data became available in 1985).

- Japan Sept Eco Watchers Current Survey: 47.1 v 47.0e.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: <1 Year; 1-3 Years; 5-10 Years; 10-25 Years; (Purchase amounts as planned for Oct).

- Japan LDP ruling bloc further delays extraordinary diet session to Oct 20th or later - press.

- Former BOJ Executive Momma: Recent sharp falls may prompt the Bank of Japan to raise interest rates as soon as this month; The biggest loser from a weak yen is the government.

- Japan PM-elect Takaichi: Discussed three points, shared agreements on two - follows meeting with Komeito Party (currently part of govt coalition).

- Japan Komeito (LDP coalition partner) leader Tetsuo Saito: PM-elect Takaichi explained her stance on our concerns; Yet to make agreement on new coalition with LDP.

- SoftBank Corp plans to launch AI and cloud services in Japan with Oracle.

Korea

- Kospi remains closed for holiday (reopens Friday).

Other Asia

- (VN) FTSE Russell announces upgrade of Vietnam from a frontier market to a secondary emerging market (update).

- Indonesia Sept Consumer Confidence: 115.0 v 117.2 prior.

- Indonesia 10-year bond yield falls -6.5bps to 6.2%, lowest since July, 2023.

- Thailand Fin Min Ekniti: Plan additional stimulus measures in Q4; looking to boost 2025 GDP growth to over 2.2%.

- Taiwan Central Bank (CBC): US has not asked us to appreciate Taiwan Dollar (NT$).

North America

- OpenAI and Anthropic said to be considering using investor funds to settle potential claims from AI-related "multibillion-dollar lawsuits" - FT.

- (CO) Colombia Sept CPI M/M: 0.3% v 0.3%e; Y/Y: 5.2% v 5.1%e.

- (US) Sec Def Hegseth said to approve next-generation US Navy fighter jet - press.

- (BR) Brazil Sept FGV Inflation IGP-DI M/M: 0.4% v 0.4%e; Y/Y: 2.3% v 2.4%e.

- (US) Fed’s Daly (non-voter): AI bubble not a threat to financial stability; AI capex boom is coming from big, stable companies with the balance sheets to support their spending - financial press.

- (CA) CANADA AUG INT'L MERCHANDISE TRADE (CAD): -6.3B V -5.6BE.

- (CA) Canada Sept Ivey Purchasing Managers Index (PMI): 59.8 v 50.1 prior.

- (US) FDIC acting Chair Hill: Use of reputation risk is ripe for abuse; FDIC proposal would eliminate its use in supervision.

- (US) Fed's Miran (FOMC voter, dovish dissenter): H1 growth was slower than expected as uncertainty weighed on economy; A lot of uncertainty has lifted.

- (US) Sept NY Fed 1-year Inflation Expectations: 3.38% v 3.20% prior.

- (US) EIA raises 2025 oil production 13.5M bpd v 13.4M prior; Raises 2026 production forecast 13.5M v 13.3M prior.

- (US) Fed's Kashkari (non-voter in 2025; voter in 2026): Data is sending some stagflation signals.

- (US) TREASURY'S $58B 3-YEAR NOTE AUCTION RESULTS: DRAWS 3.576% V 3.485% PRIOR; BTC 2.66 V 2.73 PRIOR AND 2.59 OVER THE LAST 8 AUCTIONS.

- (US) AUG CONSUMER CREDIT: $0.363B V $14.0BE.

- JPM CEO Dimon: JPMorgan spends ~$2B yearly on AI and saves roughly the same amount; Would welcome change in quarterly earnings.

- (MX) Mexico's Dep Trade Min Gutierrez: Mexico supplies 70% of the heavy trucks the US imports.

- US Pres Trump: Carney and I will talk about trade and Gaza; We'll talk about lowering tariffs on Canadian sectors; We'll have tariffs with Canada; We could renegotiate the USMCA.

Europe

- (FR) France outgoing PM Lecornu: Focusing discussions with lawmakers for now on budget and future of New Caledonia.

- (IL) Qatar Foreign Ministry spokesperson: US Pres Trump's Gaza peace plan has 20 points that have many details to work out; Can't be either optimistic or pessimistic about discussions yet.

- (IE) Ireland Fin Min Donohoe 2026 Budget Speech: Budget totals €9.4B, including €1.3B for taxation and €8.1B for spending (previously expected €1.5B for tax and €7.9B for spending).

- (TR) Turkey Central Bank (CBRT) Gov Karahan: Disinflation process has slowed down; Gradually seeing the results of tight monetary policy - comments to Parliament commission.

- BMW.DE cuts FY25 group earnings before tax to decline slightly (prior: flat y/y), cites weak China volumes.

- (UR) Russia Pres Putin: Ukraine attempting to strike deep into Russia, this won't help them.

- (RU) Reportedly traders offering Russian oil have begun asking Indian state refiners to pay in Chinese yuan - press.

Levels as of 01:20 ET

- Nikkei 225 -0.3%, ASX 200 -0.31, Hang Seng -1.1%; Shanghai Composite closed; Kospi closed.

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

- EUR 1.1612-1.1662; JPY 151.74-152.65; AUD 0.6558-0.6687; NZD 0.5739-5802.

- Gold +1.2% at $4,052/oz; BTC -2.0% at $121,780; Crude Oil +0.8% at $62.24bbl; Copper flat at $5.0920/lb.