The Bank of Japan will likely leave its benchmark interest rate untouched this week after Prime Minister Shigeru Ishiba’s recent resignation announcement added to the list of uncertainties to consider. https://t.co/nxGBFBNcCQ ...

France's Economic Outlook - Fitch's downgrade of France was anticipated due to a deficit exceeding 5% [1] - France's debt to GDP and deficit are nearly double the EU's mandated 3% levels [2] - The market reaction to the downgrade is muted, suggesting the bad news is largely priced in [3] - Fitch's stable outlook on France's A-plus debt indicates no expected change in the next year, offering reassurance to investors [4] - French bonds are expected to trade with a milder risk premium rather than rally [4] Federal Reserve (The Fed) - The market anticipates a 25 basis points rate cut by the Fed [5] - The Fed's dot plot indicating three rate cuts by the end of 2026 contrasts with market expectations of six rate cuts [5] - Markets are pricing in 35% inflation in the next year, posing a challenge for the Fed's rate-cutting policy [6] Bank of Japan (BOJ) - The Bank of Japan is expected to raise rates, influenced by the potential for a fiscally dovish prime minister [8] - If the BOJ delays raising rates, market volatility is anticipated, potentially impacting global bond markets [9]

Interest Rate Expectations & Monetary Policy - The market widely anticipates the Federal Reserve (Fed) to cut interest rates this month [1][2] - A surprisingly strong CPI number could lead to a reduction in the number of rate cuts priced in for next year, potentially lifting short-term yields [2] - The European Central Bank (ECB) is expected to remain on hold, with potential minor changes in forecasts [4] - Market expectations for the Bank of Japan (BOJ) to raise interest rates have shifted to next year, although some analysts still anticipate a hike this year [7][8] Currency Market - A strong CPI number's impact on the dollar is uncertain; it could either support the dollar with lifted yields or continue the depreciation trend [4] - The market is watching for the Euro to break out of its recent range and reach the 1.20 level, but it remains around 1.18 [5] - The dollar is expected to weaken if the Fed cuts rates while the ECB remains on hold, but this expectation is not strongly reflected in market activity [6] - Citigroup anticipates the dollar/yen to decline significantly, driven by the expectation of a BOJ rate hike [8] Economic Indicators - Recent inflation and jobs data have supported the idea that the Fed needs to proceed with rate cuts [3] - Bloomberg Economics suggests a potentially weak but not overly concerning economic outlook for the Eurozone [5] Geopolitical Factors - Political disruptions in Japan could complicate the BOJ's ability to implement a rate hike [7][8] - The intersection of politics and central bank decisions will require careful monitoring in the coming weeks [9]

Group 1 - The Bank of Japan (BOJ) is expected to raise its key interest rate by at least 25 basis points in the October-December quarter, according to a majority of economists in a Reuters poll [1] - A significant portion of economists, 55% of those surveyed, anticipate the central bank will increase borrowing costs to at least 0.75% from 0.50% next quarter, although this is a decrease from 63% in the previous month [2] - The BOJ's potential rate hike is influenced by risks such as yen depreciation and asset bubbles, with some economists suggesting that clarity on U.S. tariffs could make an October rate hike feasible [3] Group 2 - The median prediction for the year-end interest rate remains at 0.75%, with financial markets pricing in over a 50% chance of a rate hike by year-end [4] - The likelihood of further rate hikes may decrease depending on the outcome of the prime ministerial succession, particularly if a fiscal dove like Sanae Takaichi is elected [5] - Over three-quarters of economists do not expect wage increases in next year's labor negotiations to exceed this year's 5.25%, indicating potential pressure on corporate profits and economic outlook due to global economic uncertainties [6]

Core Viewpoint - The Bank of Japan (BOJ) is preparing to gradually sell its substantial holdings of exchange-traded funds (ETFs) as part of a strategy to unwind its massive monetary stimulus program initiated over a decade ago [1][2][3] Group 1: BOJ's Strategy and Holdings - The BOJ's plan to sell ETFs is a significant step in reducing its balance sheet, which has ballooned to 125% of Japan's GDP, the largest among major central banks [2] - The BOJ currently holds 37 trillion yen (approximately $251 billion) in ETFs, accumulated since 2010 to stimulate the economy [3] - The timing of the ETF sales remains uncertain, complicated by political factors, including the resignation of Prime Minister Shigeru Ishiba [1][3] Group 2: Communication and Signals - Deputy Governor Ryozo Himino has indicated that the BOJ is considering how to manage its ETF and real estate trust fund holdings, suggesting that a decision may be approaching [4] - The BOJ's communication has shifted, indicating progress towards selling ETFs, contrasting with Governor Ueda's previous statements about taking time to reach a decision [4][6] Group 3: Historical Context and Methodology - The BOJ plans to leverage its past experience in selling stocks acquired from banks between 2002 and 2010, suggesting a gradual approach to unloading ETFs rather than transferring them to government entities [5] - The previous stock sales, which took 20 years to complete, ended in July, allowing the BOJ to focus on its ETF holdings [6]

Group 1: Bank of Japan's Monetary Policy - Nearly 47% of Japanese companies view BOJ Governor Kazuo Ueda's handling of monetary policy positively, while 30% have negative views [1][2] - Ueda has ended a decade-long negative interest rate policy and yield curve control, which previously capped the benchmark 10-year yield around 0% [1] - 60% of respondents believe the BOJ should find proper ways to manage its 37-trillion yen ($251.17 billion) holdings of exchange-traded funds (ETF) regardless of Ueda's term ending in early 2028 [4] Group 2: Foreign Workers in Japan - Eight out of ten companies in Japan employ non-Japanese workers due to chronic labor shortages [6] - 55% of companies cite labor shortages as a reason for hiring foreign workers, while 39% aim to strengthen overseas operations and 30% seek specialized knowledge and technology [6] - The number of foreign workers in Japan has increased by 12.4% year-on-year, reaching a record 2.3 million in 2024 [7]

Most Bank of Japan watchers expect authorities to lift the benchmark interest rate by January, according to a Bloomberg survey https://t.co/St3N2m6INW ...

Wage Policy - Japan will increase its minimum hourly wage by a record 63% [1] Monetary Policy Implications - The wage increase supports the Bank of Japan (BOJ) potentially continuing to raise interest rates [1]

Growing market speculation over a Bank of Japan rate hike in October is underestimating the uncertainty wrought by tariffs, a former BOJ chief economist says https://t.co/9UyFtSgU5Y ...

Japanese workers’ nominal pay rose at the fastest clip in seven months, with real wages increasing for the first time this year, boosting the case for the Bank of Japan to consider a rate hike in the months ahead https://t.co/YeVascLEzU ...