Notably, the third-quarter data may give the BoJ doves the upper hand in the October monetary policy meeting, potentially delaying rate hikes until December. Several policymakers urged delaying rate hikes in September to allow time to assess incoming data. Two policymakers referenced the Tankan surveys.
The USD/JPY was up 0.14% to 147.005 in morning trading, reflecting sentiment toward the BoJ’s rate path. A delay to BoJ rate hikes could weaken the yen further, increasing carry trade exposure but reducing near-term risks of a disruptive yen Carry Trade unwind that could trigger risk asset sell-offs.
However, the threat of a US Government shutdown overshadowed the weaker yen, weighing on US stock futures and the Asian equity markets. The Nikkei 225 was down 1.2% in morning trading despite the USD/JPY pair’s morning gains.
US Government Shutdown Threat Sends US Stock Futures South
The US government edged closer to a shutdown on Wednesday, October 1. Lawmakers failed to agree on the terms for extending government funding beyond midnight in a 55-to-45 vote.
While shutdowns typically have only modest, short-lived effects, the 2018–2019 shutdown affected consumer spending and sentiment harder, shaving 0.4% off GDP.
Notably, the 2018-2019 shutdown, the longest in US history, occurred during Trump’s first term in office.