A lot of good stuff here

The BoJ and hawkish are never two things that end up in the same sentence but overnight changed that as the BoJ gave us both a rate hike to .25% from a range of 0-.10% and a cut in half in their QE bond buying program to 3 trillion. Inflation is what the BoJ wanted for years, inflation is what they got and now the people and the government are not happy that it's here and the BoJ is finally doing something about it. The 2 yr JGB yield jumped by almost 8 bps to .46%, the highest since 2009. The 10 yr yield rose 5 bps to 1.06% and the yen is ripping higher again with another big move of 1.6% to the 150ish level, the highest since March. The Nikkei was higher too as cooling inflation and giving the Japanese people some more purchasing power is good for their economy. We remain bullish and long Japanese stocks and the yen as well. 

Here were some comments from Governor Ueda:

"We've also confirmed rises in services prices. We expect a moderate cycle of rising wages and inflation to continue. The weak yen is also pushing up import prices, so we need to be vigilant to the risk of an inflation overshoot...Even though we raised rates, real interest rates remain low. Our move won't affect the economy much."

As for what is to come, "If the economy and prices move in line with our projection, we will continue to raise interest rates. In fact, we haven't changed much our projection from April. We don't see .50% as any key barrier when raising rates...If conditions move in line with our forecast, or overshoot our forecast, we could raise interest rates further...By raising rates from very low levels and adjusting the degree of stimulus gradually, we can avoid the risk of having to make big adjustments in a short period of time."

The weak yen to 160 really put the screws to the BoJ as the complaints from the government and the citizenry really left the BoJ no more choices. On the yen Ueda said, "The yen has weakened since the start of this year, but we haven't changed our consumer inflation forecasts that much...But there's quite a significant risk of the weak yen leading to an overshoot of inflation."

My bottom line, finally. 

2 yr JGB Yield

Yen

In contrast to the JGB yield move, Australian bond yields are plunging after we saw Q2 CPI in line relative to expectations but the trimmed mean calculation rose two tenths less than forecasted q/o/q. The 2 yr yield is down by 22 bps and the 10 yr yield fell by 16 bps. A big move as the RBA has some breathing room. 

The crude oil move higher in response to the Israeli killing of the Hamas official in Iran is a reminder that geopolitics this time around is a big thing we can't ignore as opposed to most geopolitical backdrops which are usually fleeting in terms of its market impact. We continue to be positive and long oil and gas stocks. 

Hong Kong's economy grew more than estimated in Q2, by .4% q/o/q and 3.3% y/o/y vs the estimate of up .3% and 2.7% respectively, helped by exports which offset weakness in consumption. Hong Kong stocks rallied by 2%. The mood is so dire with China and Hong Kong, where it's rare to see sentiment this awful. We remain bullish and long some stocks that trade there.