🏦🇯🇵Inflation And Jobs Stand Hot Heading Into the BoJ: Cable FX Macro

Activity and the labour market are the green block: IP +3.9% y/y, exports +19.3%, unemployment 2.4%, jobs-to-applicants 1.18, and wages that are extreme versus Japan’s own past (nominal cash +4.7% y/y, fastest since 1997; base pay +4.1%, fastest since 1992; real wages +2.4%). Pipeline prices are the hottest cell on the page — CGPI/PPI +7.6% y/y. Households are the red/amber residual: real household spending still −3.6% y/y, consumer confidence 35.5, Economy Watchers current 46.4.

The heat map into this meeting is two-speed. Corporate Japan and the labour market are running historically hot, which is why markets fully price a 25 bp lift in the policy rate to 1.25% — a 31-year high. The hawkish case is wages, tightness, Tankan large manufacturers at +22, manufacturing PMI near 55, and an energy-and-yen pipeline that has kept producer prices elevated. The dovish residual is the household block: real consumption is still contracting on a year-ago basis, confidence is stuck in the mid-30s, and national core CPI is only 1.8%, a shade under the 2% target, with subsidies still capping the energy pass-through. The Board can hike on wages, tightness and PPI — but the communication problem is familiar: this is an expansion households do not feel. Base case is +25 bp, a still-gradual path toward a terminal rate nearer 1.75%, and Ueda keeping optionality on the next step rather than pre-committing the October Outlook meeting.