Takaichi victory in Japan shocks betting markets, JGB yield curve steepens

Asia Market Update: Takaichi victory in Japan shocks betting markets, JGB yield curve steepens, Nikkei record high ; US payrolls and shutdown-related uncertainty continues.

General trend and developments

- USD/JPY: Tests above ¥150.

- Japan 10-year JGB FUTs open higher by 58bps; 2-year JGB yield declines by 5bps to 0.890%; BOJ rate hike expectations in focus after LDP leadership election result [Takaichi]; 10-year JGB yield rises by 1bp to 1.670%; yield curve steepens; 40-year JGB yield rises by 14bps to 3.52%.

- Who will be Japan’s Finance Min?; Will Yen weakness become a headache for Japan’s new government?

- Japan will convene extraordinary diet session on Oct 15th - press.

- (US) President Trump: Asking Fannie and Freddie to get 'big homebuilders going'; homebuilders have to start building homes; US homebuilders are sitting on 2M empty lots.; FHFA Pulte said the US GSEs will meet with the 'big' builders individually.

- Hon Hai rises after Sept sales and Q4 guidance (+0.4%) [Reports Sept (NT$) Rev 837.1B +14.2% y/y; Q3 Rev 2.06T v 2.10Te; Guides Q4 sequential growth].

- OPEC+ looked inline [OPEC+ agrees to another output increase in Nov of 137K bpd – financial press].

- Mainland China markets remain on holiday; Hong Kong and South Korea closed on Tues.

- Bank of Japan (BOJ) Quarterly Regional Economic Report (Sakura): Maintains assessment in 8 of 9 regions.

- BOJ to hold branch managers’ meeting on Oct 6th.

Headlines/economic data

Australia/New Zealand

-ASX 200 opens +0.4% at 9,022.

- Australia Sept Melbourne Institute Inflation M/M: +0.4% v -0.3% prior; Y/Y: 3.0% v 2.8% prior [**Note: The RBA has an inflation target range of between 2.0-3.0%].

-NZIER RBNZ Shadow Board: Majority of Shadow Board members recommend a 25 basis-point OCR cut in Oct [ahead of Oct 8th Monetary Policy Review and OCR]; Several members considered that the much weaker-than-expected June quarter GDP warrants a 50 basis-point cut now to provide the stimulus required for recovery.; One member suggested that the central bank should keep the OCR on hold, given the recent spike in inflation and that the impact of the OCR cuts to date is still working through the economy.

-RBNZ Annual Report: Economic conditions consistent with 2.0% inflation.

- New Zealand Sept ANZ Commodity Price M/M: -1.1% v 0.7% prior; This was mainly driven by falling dairy prices, which make up a large proportion of the index – they resumed their downward trend after a brief rally in August. Log prices also fell. However, the other components of the index rose in the month. The overall index has drifted lower since May, despite rising meat prices, but compared to a year ago it is still up 6.2%.

China/Hong Kong

-Hang Seng opens -0.5% at 27,003 [closed on Tues (Oct 7th)].

- Shanghai Composite closed for holiday [reopens Oct 9th].

-Reportedly China pushing US President Trump to drop curbs as it 'dangles' investment pledge; Sum of $1T had been discussed earlier in 2025 with current size unclear - press; China govt seeking rollback of national security restrictions on Chinese deals in the US.

-'Hawks' in China said to grow 'uneasy' over push by US President Trump for 'big deal' with Beijing - US financial press.

-Hong Kong Sept PMI (whole economy): 50.4 v 50.7 prior [2nd straight expansion]; firms noted that US tariffs continued to weigh on demand from Mainland China and globally. In fact, the latest reduction in new export orders was the most marked since March 2022.

Japan

- Nikkei 225 opens +1.9% at 46,636.

-Dec Nikkei 225 FUTs in Chicago trade as high as 48,075 after LDP leadership election result, up ~5% vs cash close on Fri.

-According to the swap market, the probability of an Oct BOJ rate hike declines to 21.0%; Dec rate hike probability declines to 41.0% v 68.0% prior - US financial press.

-Goldman Sachs sees higher long-end JGB yields after win by Takaichi – US financial press.

-Japan ruling LDP elects Sanae Takaichi as the first female PM (not as was indicated by polls) - press [update] [**Note: Analysts saw surprise Takaichi win would bias markets toward slower QT/later BOJ hikes].

-Japan PM elect Takaichi expected to select Suzuki and Aso for top roles - Nikkei.

-Japan PM elect Takaichi economic adviser Aida said she could 'tolerate' another BOJ rate hike by Jan if the economy is in 'firm shape' - financial press.

-Japan to seek nationality report on 'large' property transactions - Japanese press [Aug 29th: (JP) Japan property purchases by foreign investors hit record high during H1 – Nikkei].

-(JP) Japan largest opposition CDP party reportedly does Not rule out LDP cooperation - press [Oct 3rd]
-Bank of Japan (BOJ) Gov Ueda: Must maintain accommodative monetary environment, support economy - briefing and news conference in Osaka [Oct 2nd].

-Former BOJ official Atago said the central bank faces a new challenge of creating a 'channel of trust and communication' with PM elect Takaichi administration - financial press; According to former BOJ official Kiuchi, there is a chance that Takaichi could 'meddle' in monetary policy; expects no rate hike in Oct..

-Japan to expand the scope of anti-dumping duties to include indirect exports via third countries - Nikkei [https://asia.nikkei.com/economy/trade/japan-to-expand-anti-dumping-tariffs-amid-continued-china-overproduction].

-Asahi Group [2502.JP]: Spokesperson: Domestic production has Not resumed after cyberattack, unclear when we can resume.

Korea

- Kospi closed for holiday.

Other Asia

-Largan [3008.TW]: Reports Sept (NT$) Rev 6.24B, -4.4% y/y [**Note: Largan is an Apple supplier.].

-Vietnam Q3 GDP Y/Y: 8.2% v 7.1%e.

-Vietnam Customs: Sept footwear exports to the US -27% m/m.

North America

-(US) President Trump comments on US government shutdown: Firing of federal employees is now occurring.

-Tesla [TSLA]: CEO Musk said FSD v14 release is 'coming' on Monday - US financial press.

-OpenAI: Reportedly OpenAI's secretive AI device hit major setbacks during development and may face delays as current infrastructure struggles with compute demands making such screenless device currently unfeasible for 24/7 operation - FT.

- (US) Sen. Moreno (R-OH): Pres Trump considering significant tariff relief for US auto production [Oct 3rd].

-Boeing [BA]: Follow Up: Said to prepare for 737 production rate hike by as early as Oct; said to be issuing supplier guidance for 42 units per month, by as early as Oct - US financial press [**Reminder Sept 26th: FAA said to lift cap on 737 Max production from 38 to 42 per month; Decision may come as soon as today (09/26) - WSJ].

-Freeport McMoRan [FCX]: Issues update on Indonesia operations: PT Freeport Indonesia finds 5 missing team members deceased; the unit expects the probe into the matter to be completed by the end of 2025 [**Note: Grasberg Mine is the largest gold mine and the third largest copper mine in the world.].

Europe

-France National Rally (Far Right) Leader Bardella: New PM Lecornu cabinet fails to break with past.

-(US) President Trump said Russia Pres Putin offer on nuclear arms control 'sounds like a good idea' - financial press.

Levels as of 01:20 ET

- Nikkei 225, +4.9%, ASX 200 -0.1% , Hang Seng -0.8%; Shanghai Composite closed ; Kospi closed.

- Equity S&P500 Futures: +0.3%; Nasdaq100 +0.4%, Dax flat; FTSE100 flat.

- EUR 1.1732-1.1706 ; JPY 150.35-149.04 ; AUD 0.6613-0.6584 ;NZD 0.5841-0.5811.

- Gold +1.3% at $3,960/oz; Crude Oil +1.4% at $61.70/brl; Copper -0.4% at $5.0883/lb.