A Close Look At Friday’s Key Market Events
$EWJ, $DXJ, $NKY
The world’s leading central banks have the lack of inflation on their front burners.
The Bank of Japan (BOJ) is concerned about the forces of disinflation/deflation. Come Friday morning, the Bank of Japan and global markets will be digesting the latest Consumer Price Index data for Japan and Tokyo.
I. Japan Core CPI Report for January & Tokyo Core CPI Report for February
Note: Japan’s January National CPI 0.0% Y-Y, as expected (previous 0.2%) and National Core CPI 0.0% Y-Y (expected -0.2%; last 0.1%).
February Tokyo CPI 0.1% Y-Y (consensus -0.3%; last -0.3%) and Tokyo Core CPI -0.1% Y-Y (expected -0.2%; previous -0.1%)
Why it is important
- It excludes volatile fresh food prices, thereby providing a better look at underlying inflation trends for the nation overall and in the major population center of Tokyo specifically
- Japan emerged from a deflationary spiral in May 2013. That comeback ended a year later with National CPI, excluding fresh food, peaking at 3.40% Y-Y. Since then, Japan has seen disinflation take root and lead to the 1st deflationary reading in core CPI in more than 2 years last July.
- A deeper dip into deflation will raise concern about currency wars and Asian economies exporting disinflation/deflation
- The core CPI reading will be used as a benchmark for assessing the impact of “Abenomics,” which is oriented around the 3-Arrows of monetary easing, fiscal stimulus, and structural reform
A closer look
- National Core CPI was up 0.1% Y-Y in December for the 2nd month running
- Tokyo Core CPI was down 0.1% Y-Y in January after being + 0.1% Y-Y in December.
What is in play?
- Japan ETFs
- iShares MSCI Japan ETF (EWJ)
- Japan Hedged Equity Fund (DXJ)
- Currency Hedged MSCI japan ETF (HEWJ)
- MSCI Japan Hedged Equity Fund (DBJP)
- MAXIS Nikkei 225 Index Fund (NKY)
- iShares China Large-Cap ETF (FXI)
- ProShares UltraShort FTSE China 50 (FXP)
- iShares MSCI South Korea Capped ETF (EWY)
- MSCI Australia ETF (EWA)
- iShares MSCI Singapore ETF (EWS)
- MSCI All Country Asia, ex Japan, Fund (AAXJ)
Japanese Government Bonds
II. Economic Reports
Friday, these economic reports scheduled to be released to the market: 1. GDP, 2nd estimate (Consensus 0.4%), 2. GDP Deflator, 2nd estimate (Consensus 0.8%), 3. Personal income (Consensus 0.4%), and 4. Personal spending (Consensus 0.3%).
III. Earnings Reports
Friday early these companies report earnings to the market: HLT, AMT, BWEN, SMP, PNM, ACW, GTN, NWN, RDC, RHP, SRE, MGA, BBEP, CNP, DXPE, MEG, NWHM, OGE, OREX, HMSY, PMC, SSP, TPH, TTI, BID, HSC, NRF, PTLA, JCP, FL.