Japanese Yen

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.

This report looks at the latest developments in G10 economies and implications for bond and FX market strategy.

Even after the Fed cuts rates, policy will remain restrictive for some time. Moreover, in history, stocks have tended to fall around the first rate cut. We remain cautious on the outlook for the economy and risk assets.

The great US labor market shortage is over. Labor demand will likely fall short of supply by the end of this year, causing unemployment to soar. Neither fiscal nor monetary policy will be able to prevent the coming recession. Investors should underweight stocks and overweight Treasuries.

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?

In this monthly review, we give our take on where bond yields and the dollar are headed. This is within the lens of revisiting our fundamental indicators.