[Japan Market Conditions] Debt falls, yen rivalries against US employment statistics - stocks weaken slightly

The bond exchange rate fell in the Japanese market on the 7th. It took over the trend where long-term interest rates rose due to a sense of caution before employment statistics were announced in the United States. The Bank of Japan left the regular government bond purchase operation amount unchanged, but the impact on the market price was limited.

　　Ahead of the announcement of employment statistics that are attracting attention in predicting US monetary policy, there is a strong wait-and-see attitude in general, and the yen exchange rate is close in the latter half to the middle of the 1 dollar = 155 yen range. Japanese stocks depreciated slightly after rising and falling between the previous day's closing price.

Movements in domestic bonds, exchange rates, and stock prices on the 7th

Long-term government bond futures fell to 143 yen 83 yen, 32 yen depreciation from the previous day, and the yield on new 10-year bonds rose to 0.99%, which is 3.5 basis points (bp) higher at one point

The yen is 155 yen 64 yen with almost no change compared to the previous day against the dollar - as of 1:53 p.m.

The TSE stock price index (TOPIX) fell 0.2% to 2751.24, and the average stock price fell 0.3% to 38,608 yen 25 sen

　　The US employment statistics for May announced on the 7th will be the last major economic index to be announced before the latest outlook for interest rates for the end of the year is shown at the Federal Open Market Committee (FOMC) meeting next week. US economic indicators showing a slowdown in the labor market and inflation have continued since the beginning of this week, and the market is watching closely whether employment statistics will further reinforce observations of interest rate cuts by the end of the year.

　　Bond prices are falling. While the Bank of Japan's early policy revision observations weighed on, the response to the European Central Bank (ECB) cutting interest rates ahead of the US and the UK on the 6th was limited.

　　The Bank of Japan notified the regular government bond purchase operation at 10:10 a.m., and the target annual purchase amount remained unchanged from the previous time. Inadome Katsutoshi, senior strategist at Sumitomo Mitsui Trust Asset Management, said that the operation was left unchanged as expected, and that the market was “calming down and digesting.”　　　　　　　　　

　　As for US employment statistics, while it has been shown that labor supply and demand are relaxed, attention has been drawn in the form of the final round, he pointed out. They say, “There are many people who are prepared that US interest rates will drop further if employment statistics are not strong, and interest rates in Japan will fall more easily.”

　　The yen exchange rate on the Tokyo Foreign Exchange Market remained in the middle of the $1 = 155 yen range. After fluctuating up and down toward the published median price, there was a scene where the amount was left unchanged from the Bank of Japan's long-term government bond purchase operation and sold. After that, the mood of holding back ahead of the US employment statistics spread.

　　Akira Moroga, chief market strategist at Aozora Bank, explained about the Bank of Japan's operation that “the zone where the previous bill was broken was also left unchanged, so it was sold in yen.” On top of that, he said “it is easy to be cautious about buying dollars” due to the fact that downside risks in US employment statistics are being warned and the weight of the dollar in the 156 yen range.　　

　　According to the “status of foreign exchange reserves, etc.” announced by the Ministry of Finance on the 7th, foreign exchange reserves at the end of May decreased by about 7 trillion yen from the previous month. Due to the largest yen buying intervention ever carried out by the government and the Bank of Japan, the rate of decline (3.7%) became the second largest after 2022/9, when the first yen purchase intervention in 24 years was passed. Finance Minister Suzuki Shunichi said at the post-cabinet meeting that he did not think that foreign exchange reserves would be a restriction on exchange intervention.

　　The Tokyo stock exchange rate declined slightly. Aggressive purchases are being held ahead of US employment statistics and the Bank of Japan monetary policy meeting to be held next week. Banks, transportation equipment, and electricity are cheap, mainly by the Mitsubishi UFJ Financial Group (MUFG), where the review of recommendations for administrative sanctions against affiliated banks and two securities companies was reported. Meanwhile, chemicals, wholesale businesses, and insurance are on the rise.

　　Senior strategist Rina Oshita of Okasan Securities pointed out “a market development with a strong wait-and-see mood” ahead of announcing US employment statistics. Similar to the day before, the Nikkei Average's “39,000 yen line is heavy,” and he stated that “news that will be a new breakthrough will be necessary” in order to rise one level above the same level.

　　The biggest contributor to the TOPIX decline was the temporary 2.4% drop in price at Toyota Motor Corporation. It became known on the 7th that MUFG and 2 megabanks of Sumitomo Mitsui Financial Group (FG) are considering selling shares of the company they hold as policy holdings.