All eyes in Japan will be on BoJ Governor nominee hearing

Chris Scicluna
Emily Nicol

BoJ Governor nominee hearing scheduled Friday, alongside January CPI and final December wage numbers
It will be a busy end to the week for the Japanese news flow, with the main event being the Diet confirmation hearing of BoJ Governor nominee Kazuo Ueda and Deputy Governor nominees Shinichi Uchida and Ryozo Himino on Friday. The candidates seem likely to be cautious, however, surely being wary of offering significant insights into the path for future policy. Most likely perhaps, will be reiteration of Ueda’s recent comment that BoJ policy is appropriate and that the Bank should continue with its easy monetary policy. That, of course, should not preclude amendments to policy – particularly to Yield Curve Control – once the team takes office. Friday will also bring January CPI figures, which our colleagues in Tokyo expect to report another jump in the headline rate to 4.4%Y/Y, the highest since the early 1980s, although this will likely mark the peak. Also of interest on Friday will be updated labour earnings figures for December, which will include the pay of non-regular employees that typically earn less than their colleagues. The preliminary figures showed total wage growth jumping 2.9ppts to 4.8%Y/Y, the most since 1997. Ahead of this, the flash PMIs (tomorrow) and Reuters Tankan surveys (Wednesday) for February are due.

Flash euro area PMIs to report a further modest improvement in economic conditions, final inflation numbers also of note
Focus in the euro area this week will be on February sentiment indicators, kicking off today will the Commission’s consumer confidence index, and followed tomorrow by the flash PMIs. Having rising back above the key-50 mark in January for the first time in seven months, the composite PMI is expected to report a further improvement in conditions, albeit to be consistent with only modest growth this month. The German ifo and French INSEE business surveys will follow on Wednesday. Turning to inflation, Thursday will bring final euro area CPI figures for January. Updated data from France last week left the headline harmonised rate unrevised at 7.0%Y/Y in January, while Spanish figures saw the HICP rate upwardly revised by just 0.1ppt to 5.9%Y/Y. So, in the absence of significant revisions from Germany and Italy (data due Wednesday), we expect the headline euro area HICP rate to align with the flash estimate, that eased 0.7ppt to 8.5%Y/Y, an eight-month low. The core rate is similarly expected to be unrevised at a series high 5.2%Y/Y.

Flash UK PMIs likely to be consistent with ongoing contraction
February sentiment indicators will dominate the dataflow in the UK too, kicking off with the flash PMIs tomorrow. In January, the services index fell to a two-year low of 47.9, while the manufacturing output index (47.0) recorded the seventh consecutive sub-50 reading. So, while these might well report a slight easing in the pace of decline this month, the headline composite activity PMI is likely to remain consistent with contraction, reflecting not least subdued domestic demand. The CBI distributive trades survey (Thursday) will provide a first guide to retail spending this month, while the latest GfK consumer confidence survey (Friday) seems bound to show that households’ purchase intentions remained historically weak in February. In addition, January public finance figures (tomorrow) will be the last to be published ahead of the Spring Budget on 15 March.

Fed minutes, income, spending and deflators on the US calendar
After today’s Presidents’ Day holiday, this week will bring a couple of notable releases from the US. In particular, the minutes of the 31 Jan-1 Feb FOMC meeting are due Wednesday. However, after that meeting saw the pace of rate hikes slow to 25bps, the US dataflow has strengthened, with a string of upside surprises. So, the balance of views on the Committee to be revealed in the minutes might not necessarily be a wholly reliable guide to the current state of play. Indeed, of this week’s data, Friday’s personal income and spending data for January will undoubtedly be firm. Not least informed by the strong nonfarm payroll (517k) and retail (3.0%M/M) reports for the month, our colleagues in Daiwa America expect both income and spending to rise by 1.0%M/M. Last week’s CPI report (0.5%M/M headline, 0.4%M/M core) should be matched by similar month-on-month readings for the personal consumption deflators – that would leave the headline PCE deflator unchanged at 5.0%Y/Y but see the core measure edge down to 4.3%Y/Y. Other data due include existing and new home sales (tomorrow and Friday respectively) and a revised estimate of Q4 GDP, which should nudge down the figure for growth by about 0.2ppt to 2.7%Q/Q annualised in part due to slightly softer assessments of consumer spending and inventories.

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