Japan Macro & Fixed Income Strategy: Weekly Macro & Fixed Income Strategy

This weekly report focuses on the impact of the BoJ's 18 September decision to raise its policy rate to 1.25%. Total bank lending rose 5.4% YoY in August, the fastest growth excluding the pandemic under comparable data dating to 2001, but growth slowed after peaking in June. City banks grew 7.9%, versus 4.1% at regional banks and 2.0% at shinkin banks, suggesting the rate-hike impact is felt first at regional financial institutions. The report expects further hikes roughly every three months and believes the BoJ will be forced within the next year to revise its view that financial conditions are accommodative. On JGBs, September month-end offers no statistically significant bullish signal in super long JGBs, while early October sees super-long-led bear steepening: 10s30s steepened an average 2.6bp (22 of 26 years), with the 30-year yield up an average 5.1bp over 10 business days before retracing about 60% by mid-November. Next week's indicators include the August services producer pric