Yen stronger after warning of joint US -JP intervention

Asia Market Update: Yen stronger after warning of joint US-JP intervention; US-TW deal better than KR/JP with no timeline for $; Weekend geopolitical risk with still no action on IR.

General trend and developments

-Joint Yen intervention with US? [Reminder Apr 6 2011: (JP) Japan Vice Min (now former) Tamaki: Reiterated that the G7 joint fx intervention was effective]

- USD/JPY initially steady as a $2.1B option expiration is in focus today with a strike price at ¥158. But Fin Min Katayama then stated potential for joint US-Japan intervention on weak Yen. However, USD/JPY only marginally down on the announcement.

-Chances of a BOJ rate hike continued to jump up; OIS overnight shows 54% chance for Apr, vs 43.5% day before, and 82% chance by June, vs 72.5% day before; Overnight reports that the Japan BOJ may hold rates at 0.75% next week (Jan 23rd) but the weak Yen may impact on policy path going forward.

-Japanese flows last week showed foreigners buying over a1 Trillion Yen of both Japanese equities and bonds.

-Soft demand seen at Japan MOF Liquidity Enhancement Bond auction

-Japanese corporates (NTT, Honda) pricing bond issuance today in addition to Samurai Bonds from Credit Agricole

-Global corporate bond yield premiums said to hit the lowest level since 2007 - press; [is this trend sustainable?]

-Taiwan's TAEIX hits record high, +1.7% following TSMC Q4 earnings and outlook, while shares of TSMC +2.7% today (although note that TSMC's ADRs overnight were as much as 4.4% higher).

-Earlier in the US session, semiconductors and NASDAQ initially ripped higher after TSMC last night delivered a record quarter and bullish forward guidance: However, US chip-relateds lost some of their gains heading into the US close with the NASDAQ notably lagging other indices despite what should have been bullish news for the chips market. Note that today’s Japanese chip-relateds were mostly muted, and Hynix up only 0.4%. Samsung outperformed +3%.

-Late in yesterday’s Asia session China PBOC stepped up targeted easing. Flagged 25bp cuts to structural policy tool rates and relending rates (to 1.25%, effective Jan 19th), plus measures to support credit to priority sectors such as green economy, agriculture and small businesses. ** Note: Represents only ~13% of the PBOC balance sheet. Reiterated no intention to use FX depreciation for trade competitiveness. [**Note: No announcements of cuts to benchmark policy rates such as Reverse Repos, MLF, SLF, RRR, although PBOC did indicate there may be “space” for such cuts going forward.]

-Sell-side analysts debate whether the recent easing measures by the PBOC imply future reductions in the key Chinese policy rates.

-Last night Japan center-left CDP party leader Noda confirmed to establish new political party with former LDP-coalition partner Komeito. [This is clearly a rushed reaction to the perceived threat of Takaichi’s LDP party regaining an outright majority in the Lower House snap election scheduled for some time in Feb. Implications for potentially higher fiscal spending in Japan However, the CDP and Komeito have some significant differences in outlook and policy with little time to work through details; How this will impact each party’s base at the election is an unknown].

-New Zealand economy continues its recovery, with Dec Manufacturing PMI up five big handles to 56.1, a four-year high; The RBNZ also released its Q4 Nowcast GDP estimate at a healthy +0.9% growth q/q.
-Aussie bond yields rise on syndicate timing [AOFM: Confirms planned 2037 debt syndicate; To be issued week of Jan 19th].

-US and Taiwan agree on quota system for chip tariffs; US will lower tariffs to 15% on imports from Taiwan in exchange for commitments of $250B each in chip investment and credit guarantees from Taiwan, however, today Taiwan’s Vice Premier stated there is No timeline given for the investments.

-South Korea silent today on FX thus far. Some see the US/Taiwan trade agreement as another headache for Korea as Korea is struggling to fulfill its own $20B per year investment goal in the US. [Reminder Nov 25th 2025: Taiwan Premier Cho-Jung-tai said 'no information' on cooperation with South Korea on US chip tariffs].

-Chinese equity sentiment has remained cautious after margin change announcements from the Beijing and Shenzhen Exchanges [Jan 14th]
Alibaba Health Information Technology [241.HK] shares have yet another volatile session.

- Weekend geopolitical risk re Iran with WTI crude stuck in thin range ~$59 as US military moves air, land and sea assets to the Middle East.

- Note Monday is a market holiday in the US.

- US equity FUTs +0.3% to +0.4% during Asian trading.

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

- Fri Jan 16th 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 flat at 8,859.

-Australia sells A$700M v A$700M indicated in 3.25% Apr 2029 Bonds: Avg Yield 4.1099%: ;bid-to-cover: 4.52x.

-New Zealand Dec Food Prices M/M: -0.3% v -0.4% prior.

-New Zealand Dec Manufacturing PMI: 56.1 v 51.4 prior (3rd month of expansion).

-RBNZ: Q4 Nowcast GDP est at 0.9%.

China/Hong Kong

-Hang Seng opens +0.6% at 27,094; Shanghai Composite opens +0.4% at 4,127.

-China said to clamp down on high-speed traders, removing data servers - US Financial Press.

-China National Team ETFs reportedly see record outflows - financial press.

-NVDA (CN) House China Committee Chair Moolenaar (R-MI) asks about NVIDIA H200s; Expects memory shortage to hit Nvidia's China approvals [overnight update].

- Canada and China sign various MOUs including energy cooperation and forestry [overnight update].

-China reportedly extends tax incentives for overseas investment in bonds - press [overnight update].

-China FX Regulator (SAFE): To formulate a basket of policy measures to promote cross-border financing [overnight update].

-CHINA PBOC DEP GOV ZOU LAM: NO INTENTION TO USE CURRENCY DEPRECIATION TO GAIN INTERNATIONAL TRADE COMPETITIVENESS [overnight update].

- China MOFCOM: On EU minimum price plan for China EV, positive steps towards stable trade ties - financial press [overnight update].

-China Premier Li to Canada PM Carney in Beijing: Willing to promote stable growth in bilateral trade - CCTV [overnight update].

-China FX deposits hit $1.07T at end-2025 (highest since records began 2002) [overnight update].

-CHINA PBOC DEP GOV ZOU LAM: TO CUT INTEREST RATES ON VARIOUS STRUCTURAL POLICY TOOLS, INCL RE-LENDING RATES BY 25BPS TO 1.25%; effective from Jan 19th, 2026 [overnight update].

-CHINA DEC YTD AGGREGATE FINANCING (CNY): 35.6T V 35.269TE [overnight update].

-CHINA DEC YTD NEW YUAN LOANS (CNY): 16.3T v 16.2TE [overnight update].

-CHINA DEC M2 MONEY SUPPLY Y/Y: 8.5% V 8.0%E [overnight update].

-China PBOC sets Yuan reference rate: 7.0078 v 7.0120 prior.

-PBOC Open Market Operation (OMO): Injects CNY87B; Net injects CNY53B v injects CNY169B prior.

Japan

-Nikkei 225 opens -0.1% at 54,071.

-Japan releases weekly flows data [period ended Jan 9th]: Foreign buying of Japan equities: +¥1.1T v +¥124.9B prior; Japan buying of foreign bonds: +¥101.1B v -¥223.6B prior.

-Japan MOF sells ¥649B v ¥650B indicated of JGBs in Liquidity Enhancement Auction.

-Japan sells ¥4.7T vs. ¥4.7T indicated in 3-Month Bills; Avg Yield: 0.7079% v 0.6755% vprior; Bid-to-cover: 3.17x v 2.92x prior.

-JAPAN FIN MIN KATAYAMA: INTERVENTION INCLUDED AS AN OPTION IN US-JAPAN AGREEMENT - financial press.

-BOJ REPORTEDLY LIKELY TO HOLD RATES UNCHANGED THIS MONTH, BUT WEAK YEN MAY IMPACT BOJ POLICY PATH GOING FORWARD - PRESS [overnight update].

-Japan Fin Min Katayama: Fiscal reform impossible without economic growth [overnight update].

Korea

-Kospi opens +0.5% at 4,820

-Follow Up: South Korea is expected to announce a 'bigger-than-expected' housing supply plan - Local press.

- South Korea govt said to offer >KRW20T in assistance to regions that merge - Yonhap.

-South Korea sells KRW800B in 50-year T-Bonds: Avg Yield: 3.220%.

Other Asia

-Malaysia Q4 Advance GDP Y/Y: 5.7% v 5.4%e- Singapore Dec Non-oil Domestic Exports Y/Y: 6.1% v 10.1%e.

-(TW) Follow up: Taiwan Vice Premier: $250B US investment pledge includes current plans; Our deal with US is different than the Japan, South Korea deals - press.

-(TW) US and Taiwan agree on quota system for chip tariffs; US will lower tariffs to 15% on imports from Taiwan in exchange for commitments of $250B each in chip investment and credit guarantees - press cites White House statement.

-Taiwan's TAEIX hits record high, +1.7% following TSMC Q4 earnings and outlook-2330.TW Shares +2.7% following Q4 results (ADRs overnight were as much as 4.4% higher).

-Taiwan Semi: *REPORTS Q4 (NT$) NET 505B V 466.7BE v 384B y/y, OP 565B V 527.2BE (+32.7% y/y), REV 1.046T v 868.5B y/y [overnight update].

North America

- (IR) Reportedly US military is moving air, land and sea assets to the Middle East; At least one aircraft carrier group is moving toward the region - Fox News.

-*(US) NOV TOTAL NET TIC FLOWS: +$212B V -$37.3B PRIOR; NET LONG-TERM TIC FLOWS: $220.2B V $17.5B PRIOR.

- (US) JAN EMPIRE MANUFACTURING: 7.7 V 1.0E; New Orders: +6.6 v -1.0 prior; Prices Paid: 42.8 v 44.2 prior.

- (US) JAN PHILADELPHIA FED BUSINESS OUTLOOK: 12.6 V -1.4E;New Orders: 14.4 v 5.7 prior; Prices Paid: 46.9 v 24.3 prior.

- (US) INITIAL JOBLESS CLAIMS: 198K V 215KE; CONTINUING CLAIMS: 1.884M V 1.90ME.

- (US) Fed's Goolsbee (non-voter): Not surprised by low employment claims; Seeing more stability in jobs market - CNBC.

- (US) Fed's Bostic (non-voter): Expect 2026 GDP growth >2%; Expect inflation pressures will continue through 2026; Need to stay restrictive because inflation too high - speech text.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: -71 BCF VS. -87 BCF TO -90 BCF INDICATED RANGE.

- (IR) US Treasury Dept's Office of Foreign Asset Controls (OFAC) adds 7 individuals and 13 entities to sanctions list; Sanctions shadow banking networks that support Iran.

-(US) Fed's Barr (voter): DOJ investigations are 'assault on the independence of the Fed'; Base case is inflation continuing towards 2% - Yahoo Finance interview.

-(IR) Reportedly Israel PM Netanyahu and Arab states asked US Pres Trump on Weds (01/14) to delay attack on Iran - NY Times.

-(US) Fed's Schmid (hawk; non-voter in 2026): Latest data consistent with inflation close to 3%; See little reason at this point to cut rates - speech text.

-(US) Philadelphia Fed Pres Paulson (voter): Comfortable holding rates steady at next meeting, could support cutting rates modestly later in 2026; Labor market risk a bit higher than risk of sticky inflation - WSJ interview.

Europe

- (IE) Ireland Dec CPI M/M: +0.5% v -0.2% prior; Y/Y: 2.8% v 3.2% prior.

- (EU) EU confirms new Russia crude oil price cap to be $44.10/bbl; effective Feb 1st.

- (SE) Sweden Central Bank (Riksbank) Bunge: Inflation has moved closer to our target and real economy has started to recover.

-(IL) Israel Dec CPI M/M: +0.0% v -0.1%e; Y/Y: 2.6% v 2.6%e.

Levels as of 01:20 ET

Nikkei 225 flat; ASX 200 +0.5%; Hang Seng -0.4%; Shanghai Composite -0.2%; Kospi +1.2%.

Equity S&P500 Futures +0.3%; Nasdaq100 +0.4%; DAX -0.3% FTSE100 +0.1%.

EUR 1.1603.116.14; JPY 157.98-158.70; AUD 0.6695-0.6708; NZD 0.5739-5759.

Gold -0.4% at $4,603/oz; BTC -1.2% at $95,198, Crude Oil -0.2% at $59.08/bbl; Copper -1.3% at $5.9120/lb.