2025/11/20 - Rising possibility for FED Rate Cut and 21 trilltion JPY stimulus package

United States

After the 25bp cut last month, and consecutive hawkish comments from FED officials dollar was gaining and no additional cut in December seemed to be the market consensus. However, things changed after the New York FED president John Williams spoke to the public about interest rates could fall without putting the Fed's inflation goal at risk, while helping guard against a slide in the job market.

 

"I view monetary policy as being modestly restrictive...Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral,

Korea

Surging KTB yields in all tenors. Market is pricing in no additional rate cuts in the future due to financial instability. Volatile USD/KRW rate reaching nearly 1,480won and persistent rally in the housing market makes BOK hard to deliver a rate cut. Moreover, the domestic economy is led by strong export figures from semiconductor industires. Followed by supplementary budget effects and consumable cash handouts helping boost the locl economy in 3Q in the short term. Also BOK governer Lee interviewed for Bloomberg TV metioning an pivot in the policy rate trajectory. 

 

Japan

Japan's PM Takaichi's government has announced economic stimulus package of 117 billion USD supplementary budget for this year to fund for the massive stimulus package.Most of which will be financed through new debt issuance. The 21.3 trillion yen general account spending undersocres Takaichi's agressive fiscal stance amid heightened concerns over Japan's already weak fiscal conditions. This package was aimed to cushioning households from high inflation and spurring economic growth.. Most of the spending will be focuses on heightened cost of living. Government forecasts this move will boost the real GDP growth by annual 1.4% rate. 

 

The stimulus package includes 2.7 trillion yen in tax cuts and 8.9 trillion yen to ease living costs, such as cash handouts of 20,000 yen per child and subsidies for electricity and gas bills. Another 6.4 trillion yen will fund strategic investments in sectors like shipbuilding, semiconductors and artificial intelligence.

 

In an apparent effort to address concerns over recent rises in super-long yields, Japan plans to increase scheduled sales of short- and medium-term bonds with no increase in issuance of long- and super-long bonds. The government is aiming for parliamentary passage of the extra budget by the end of next month.

 

Fiscal expansion of the newly eleted PM is severly impacting JGB yields and USD/JPY rate. The next BOJ meeting will be held on Dec. 18th and market is pricing in a rate hike of around 55%. It will be interesting to see whether BOJ will be able to carry out a rate hike with Takaichi running the government. 

Recent slide in the fx rate due to hawkish comments from BOJ

JGB Bear Steepening all day

 

China

Chian's Loan Prime Rate for 1 year stands at 3.00% which is mainly used for individual loans. PBOC kept 5 Year LPR unchanged at 3.50% which is usually used for 5 year housing mortgages.

 

Whanki Kim

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USD/KRW exchange rate: 1,469.14원

USD/JPY exchange rate: 157.71엔

USD/CNH exchange rate: 7.1191위안

EUR/USD echange rate: 1.1508달러

CNY/KRW exchange rate: 206.51원

DXY: 100.35

 

US Treasury 30Y yield: 4.757%

US Treasury 10Y yield: 4.143%

US Treasury 2Y yield: 3.613%

 

KTB 30Y yield: 3.244%

KTB 10Y yield: 3.307%

KTB 3Y yield: 2.901%