Is BoJ preparing a pre-Christmas surprise?

Friday 8th December 2023

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Probably not, is the answer to our headline, but NAB’s Ken Crompton says markets are pricing in a heightened expectation of the BoJ moving from negative rates sometime soon. The sharp rise in Japanese government bond yields yesterday and overnight almost wiped out the falls over the last month, but yields remain well below early November, when they almost touched 1%. Elsewhere, Australia’s trade surplus increased but it was largely due to a fall in capital goods imports, reversing the recent rise. Europe showed more signs of a slowdown, with German industrial production down and Q3 GDP revised lower. The focus now is now on non-farm payrolls. Ken says there’s more upside potential for bond yields if we assume markets have been too optimistic in their pricing of rate cuts next year.

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