Japan

In this report, we argue that the Bank of Japan is unlikely to hike interest rates this week, but the relative trajectory of bond yields in Japan is higher. This warrants an underweight position in JGBs and a leveraged bet on a higher yen. The positioning for equity investors is murkier, as progress on corporate reforms is necessary for a rerating in Japanese shares. That is not yet very clear. The bottom line is: Stay long the yen.

The unwind of yen carry trades caused violent tremors across the globe. Was this shock a one-off event or the prelude to more troubles?

The market is pricing in a soft landing, but we see growing signs that the global economy is faltering. Investors should be defensively positioned.