Tag: Japan

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What’s going on in the U.S. bond market?

Treasury yields

The U.S. bond market is experiencing some turbulence due to rising Treasury yields and concerns over government debt.

Investors are demanding higher yields because they’re worried about the GOP’s tax-cut plans, which could lead to increased borrowing and a larger deficit.

Additionally, the recent Trump tax bill has caused Treasury bond yields to surge, as investors anticipate more government debt issuance. Moody’s has also downgraded the U.S. credit rating, adding to market jitters.

The bond market’s reaction is significant because higher yields can lead to increased borrowing costs across the economy, affecting everything from mortgages to corporate financing.

Japan

Japan’s bond market is facing significant turbulence, with yields on 40-year government bonds hitting an all-time high. This surge in yields is causing concerns about capital repatriation, as Japanese investors may start pulling funds from the U.S. and other foreign markets.

The Bank of Japan’s reduced bond purchases have contributed to this trend, leading to weaker demand for long-term government debt. Analysts warn that if Japanese investors begin moving their capital back home, it could trigger a global financial market shake-up.

Additionally, Japan’s Finance Ministry is considering reducing the issuance of super-long bonds to stabilise the market. However, recent auctions have shown weak demand, raising concerns about the effectiveness of this strategy.

Europe

The European bond market is experiencing some shifts due to falling government bond yields and easing U.S. – EU trade tensions.

German 10-year bund yields dropped by 4 basis points, reflecting increased investor confidence.

UK and French 10-year bond yields also declined by 4 basis points, while Italian bonds saw a 2 basis point dip.

Long-term UK gilts experienced the biggest movement, with 20 and 30-year yields falling by 7 basis points.

This decline in yields suggests higher demand for European government debt, possibly due to investors shifting away from U.S. assets amid concerns over U.S. fiscal health.

UK

The UK bond market is facing some challenges, with the IMF warning that it is vulnerable to sudden shocks due to a growing reliance on hedge funds and foreign investors.

30-year gilt yields have hit 5.5%, the highest in over three decades.

The Bank of England’s quantitative tightening and increased bond issuance are putting pressure on the market.

The Debt Management Office (DMO) is shifting towards short-dated debt to reduce long-term interest costs.

Additionally, the UK government has launched a new 30-year gilt offering 5.375% interest, which is attracting investor attention.

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Japan’s core inflation rises to 3.5% – higher than expected

Japan economic data

Japan’s inflation figures for April 2025 have revealed a continued rise in consumer prices, with the Consumer Price Index (CPI) climbing 3.6% year-on-year.

This marks a sustained period of inflation above the Bank of Japan’s (BoJ) target of 2%, prompting speculation about potential interest rate hikes later in the year.

Core inflation, which excludes fresh food, rose 3.5% YoY, exceeding market expectations. A major driver of this surge has been food prices, particularly rice, which has soared by an astonishing 98% compared to last year.

The sharp increase has led the government to release emergency stockpiles to stabilise the market.

The BoJ faces a delicate balancing act. While inflation remains strong, economic uncertainty – partly fueled by U.S. tariffs, could complicate monetary policy decisions. The central bank has already raised rates in recent months but has paused further hikes to assess the broader economic impact.

With inflationary pressures persisting, analysts predict that the BoJ may tighten policy again by October 2025.

Concerns over global trade and domestic economic stability could influence the timing of any further rate adjustments.

The core inflation increase of 3.5% was far higher than expected.

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Japan’s inflation up 3% in February 2025 – interest rates expected to rise

Japan inflation

Japan’s core inflation rate rose to 3% in February, exceeding market expectations of 2.9%

This marks the 35th consecutive month that inflation has remained above the Bank of Japan’s 2% target.

While the figure is slightly lower than January’s 3.2%, it reflects persistent price pressures, driven by rising food and wage costs. Government subsidies for fuel helped ease the overall inflation rate to 3.7%, down from January’s 4%.

The Bank of Japan has maintained its interest rate at 0.5%, but the data strengthens the case for potential rate hikes in the coming months as inflationary trends continue to challenge households.

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Japan ekes out economic growth of 0.7% in 2024

Japan growth

Japan’s economy showed modest growth in 2024

The economy expanded by 0.7% in the fourth quarter, which was higher than market expectations of 0.3%. However, for the full year, Japan’s GDP growth was just 0.1%, a significant slowdown from the 1.5% growth seen in 2023.

Exports played a key role in boosting economic growth during the fourth quarter, while domestic demand remained relatively weak.

The Bank of Japan has been gradually raising interest rates, signalling a move away from the long-standing policies aimed at combating deflation.

It’s a mixed picture, but there are some positive signs, especially with the increase in business spending and a rebound in inbound consumption

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Japan increases interest rate chasing down rising inflation

Bank of Japan

The Bank of Japan recently raised its interest rate by 25 basis points to 0.5%, marking the highest level since 2008

This decision was influenced by sustained inflation and rising wages, signalling a cycle in the economy.

The move was expected by many economists and resulted in the Japanese yen strengthening against the dollar.

The Bank of Japan has indicated that more interest rate hikes may be on the horizon.

One year Nikkei chart

One year Nikkei chart
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Nikkei rises 3% to lead gains in Asia

Japan shares

Japanese stocks led gains across Asia on Friday 16th August 2024, poised for their best week in four years, with the Nikkei 225 climbing over 3% following a Wall Street rally.

The surge came as new economic data alleviated concerns of a U.S. recession.

In the U.S., retail sales saw a 1% increase in July, significantly exceeding the Dow Jones estimate of a 0.3% rise. Additionally, weekly jobless claims experienced a decline.

The rise in the Nikkei came after the biggest fall in history just days ago where it hit historic lows last seen in 1987 making it a remarkably fast recovery.

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U.S. stock markets rise after days of turmoil

Stocks up

U.S. shares gained on Tuesday 6th August 2024, signalling a tentative stabilisation in global markets after a period of significant declines.

The Nasdaq, known for its tech-centric portfolio, along with the Dow Jones Industrial Average and the S&P 500, all ended the day in more positive territory.

This ‘lift’ came after a period of muted activity in UK and European markets, with London’s FTSE 100 experiencing an initial surge before retreating.

In Japan, the Nikkei 225 stock index recorded a substantial rise of 10.2%, or 3217 points, marking its largest single-day point increase following a steep drop the day before.

The recent turmoil in the stock market was triggered on Friday 2nd August 2024 by unsatisfactory U.S. job data for July 2024, which indicated an increase in unemployment, raising alarms over a potential recession.

Additionally, there has been growing apprehension that stocks of major technology firms, especially those with significant investments in artificial intelligence (AI), may have been excessively valued, leading to challenges for some of these companies.

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Japan’s Nikkei suffers worst day since the Black Monday crash of 1987

Japan stocks crash!

Japanese stocks entered a bear market on Monday 5th August 2024 as the sell-off in Asia markets continued from the previous week. The Nikkei 225 fell over 12%

These benchmark indices have now declined more than 20% from their peak on 11th July 2024 – the index then touched 42000.

The Nikkei suffered over a 12% loss, closing at 31458, marking its worst performance since the ‘Black Monday’ of 1987. This drop of 4451 points is also the largest point loss in its history.

Year to date, the Nikkei has relinquished all its gains, shifting into a negative territory.

Nikkei one year chart

Nikkei one year chart

Nikkei one day chart – down 12.4% on the day a total of 4451 points

Nikkei one day chart – down 12.4% on the day a total of 4451 points
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Asia markets fall as Japan’s Nikkei drops 5% to an 8-month low

Nikkei falls

Japan’s benchmark indices plummeted on Friday 2nd August 2024, with most Asia-Pacific markets lower after a sell-off on Wall Street created recession worries.

The Nikkei 225 index plunged around 5.80% to close at 35909, its most significant fall since March 2020, dipping below the 36000 for the first time since January 2024.

The Nikkei recently record a high of 42000

Nikkei 225 one-year chart 2nd August 2024

Nikkei 225 one day chart 2nd August 2024

Nikkei 225 one day chart 2nd August 2024

The broader Topix index experienced an even steeper decline of 6.14%, marking its worst performance in eight years, ending the day at 2537.

Daiwa Securities emerged as the biggest loser on the Nikkei index with an 18.85% erosion of its market cap.

Other prominent stocks also suffered losses; Softbank Group’s shares dropped over 8%, while trading giant Mitsui recorded a decline of more than 10%.

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Japan’s Nikkei blast through 42000 to reach all-time high

Nikkei Lift Off!

Japan’s Nikkei 225 surpassed the 42,000 threshold for the first time ever during a widespread increase in Asia-Pacific markets on Thursday 11th July 2024.

This surge followed a rally in U.S. Big Tech stocks, fueled by optimism over a potential Federal Reserve rate cut moving ever closer.

The Nikkei climbed almost 1% to close at 42,224 driven by gains in technology shares, while the comprehensive Topix index advanced to finish at 2,929.

Nikkei index

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Japan, India and U.S. stock markets continue to hit new record highs!

Record highs

Asia-Pacific markets witnessed highs on Tuesday 8th July 2024, mirroring the gains on Wall Street where the S&P 500 and the Nasdaq Composite ended at record highs. India’s Nifty 50 index also hit an all-time high of 24401.2

Investors are anticipating the forthcoming U.S. consumer price index release to discern the Federal Reserve’s direction on interest rates.

Pundits

Pundits have moved this year from four 0.25% rate reductions to one and now maybe to two with the first in September 2024. The Fed trickles decisions out from its fickle stance and each time the markets move in anticipation like a lap dog eagerly awaiting a pat. It almost doesn’t matter what the Fed does – markets want to go up. However, a rate reduction and good economic and earnings news will drive the markets even higher, for a while.

Fickle Fed

Markets are currently anticipating earnings reports. The Federal Reserve, having considered the latest economic reports, has influenced the markets with a mix of indifferent decisions. AI and technology have significantly shifted the stock market landscape, with the potential for further growth – provided that earnings sustain the pace of AI investments and expenses.

Both the S&P 500 and the Nasdaq Composite achieved record highs again overnight, alongside Japan’s Nikkei and Topix reaching new highs too.

The Nikkei 225 climbed to settle at 41580.17 after hitting a new high of 41769.35. The Topix also gained, closing at 2895.55, having touched a peak of 2907.21.

Nikkei

Topix

S&P 500

Nasdaq Composite

Nifty 50

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Japan’s Nikkei passes 41000 – then trims gain slightly

Nikkei hits new record

On 5th July 2024, Japan’s benchmark Nikkei 225 index climbed above 41,000 before retreating from its record close of 40,913.65.

The Nikkei 225 serves as a crucial barometer for the Japanese stock market, representing the performance of prominent companies on the Tokyo Stock Exchange. It continues to stand at historically elevated levels.

Nikkei one year chart closes at 40912 after passing 41000 for the first time

Nikkei one year chart closes at 40912 after passing 41000 for the first time
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China manufacturing and Japan’s GDP contracts – Asia markets mixed

Economic data

Over the last weekend of June 2024, China released its official PMI figures, with the manufacturing PMI remaining at 49.5, the same as in May 2024, indicating a second consecutive month of contraction.

On Monday 1st July 2024, Japan adjusted its first-quarter GDP figures, showing a contraction of 2.9% year-on-year, a revision from the previously reported 1.8%.

Asia markets started the second half 2024 mixed as investors assessed June business activity data from China as well as Japan’s GDP revision.

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Japanese yen slumps to fresh 38-year low against the U.S. dollar

Yen slumps against dollar

On Friday 28th June 2024, the Japanese yen dropped to its lowest point in 38 years, surpassing the 161 threshold against the dollar reached for the first time since December 1986.

The yen has faced challenges, slipping beyond the 160 mark again.

Since the Bank of Japan concluded its negative interest rate policy and reportedly abandoned its yield curve control policy in March 2024, the yen has been on a consistent decline.

After this policy change, the yen breached the 150 level against the U.S. dollar and hit 160 in late April 2024, which prompted intervention by the country’s finance ministry.

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Chinese auto sales overtake U.S. for the first time

EV competition

For the first time, automotive companies in China surpassed their U.S. counterparts in car sales last year, driven by BYD and expansion in emerging markets, according to a data released Thursday 13th July 2024.

Chinese brands such as BYD now at the forefront, reportedly sold 13.4 million new vehicles last year. In comparison, American brands sold approximately 11.9 million units. Japanese brands remained at the top with 23.59 million sales.

China’s sales growth rate surpassed that of the U.S., with a 23% rise from the previous year compared to the U.S.’s 9% increase.

The consistent high pricing by legacy automakers has inadvertently steered consumers towards more affordable Chinese alternatives.

No surprise here then as manufacturers milked profits from legacy lineups!

Tariffs have now been introduced on China to curb their automakers runaway success.

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The World’s largest pension fund explores Bitcoin as an investment option

Japan and Bitcoin

Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, is reportedly considering Bitcoin as a potential investment.

With an impressive $1.4 trillion in assets under management, the GPIF’s exploration of Bitcoin represents a notable departure from its conventional investment approach.

This development occurs during a significant increase in Bitcoin’s value, showcasing its potential as a profitable asset, despite its volatility. The GPIF is gathering information on Bitcoin, seeking academic research, analytical tools, and examples of investments. This inquiry demonstrates the GPIF’s willingness to consider innovative financial tools.

It is important to appreciate that although the GPIF is researching Bitcoin, it is not certain that they will invest in it. The decision will likely hinge on various elements, such as risk evaluation, market fluctuations, and regulatory factors.

The GPIF’s actions may influence other institutional investors to contemplate including cryptocurrencies in their portfolios. This event could significantly impact the global financial scene. With the world’s largest pension fund examining Bitcoin, the debate over cryptocurrencies as valid investments continues.

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Japan’s Nikkei hits another new record

Nikkei index up

Japan’s Nikkei 225 index briefly surpassed 41000, reaching a new all-time high on Friday 22nd March 2024, as the nation’s inflation rate reportedly accelerated in February 2024. Other Asia-Pacific markets experienced declines.

The headline inflation rate in Japan for February 2024 was reported at 2.8%, an increase from the 2.2% recorded in January 2024. The core inflation rate, which excludes the cost of fresh food, also rose to 2.8% from the 2% reported the previous month.

In its monetary policy statement, the Bank of Japan (BoJ)stated that it aims to achieve the price stability target of 2% in a sustainable and stable manner.

The Nikkei retreated to close just below 41000, ending up at 40888

The Nikkei retreated to close just below 41000, ending up at 40888
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Bank of Japan ends negative rates: a seismic shift in monetary policy

The flag of Japan

In a move that reverberated across global financial markets, the Bank of Japan (BOJ) recently bid farewell to its negative interest rate policy – the last of its kind in the world. This decision marks a pivotal moment in the realm of central banking and has far-reaching implications for economies and investors worldwide.

The Negative Interest Rate Saga

To understand the significance of this shift, let’s rewind the clock. Japan, grappling with deflation for years, embarked on an ambitious economic experiment known as ‘Abenomics’ in 2013. The strategy combined massive government spending with unconventional monetary measures. The BOJ, under the leadership of then-Prime Minister Shinzo Abe, injected liquidity into the system by purchasing bonds and other assets. The goal? Achieve a 2% inflation target and kickstart growth.

Among these measures was the adoption of negative interest rates. The idea was simple: discourage banks from hoarding excess reserves and encourage lending. However, the path to higher inflation proved elusive, and the BOJ found itself navigating uncharted waters.

The Change

Fast forward to 2024. Japan’s economy has experienced a moderate recovery, prompting policymakers to reassess their strategic options. The Bank of Japan (BOJ) has elevated its short-term interest rate from minus 0.1% to a range between zero and 0.1%. This adjustment marks the first increase in rates since 2007, representing a significant, even a ‘seismic’ policy shift.

The Effect

  1. Policy Pivot: The BOJ acknowledges that negative rates have played their part. With improving wages and corporate profits, the time is ripe for a change. The new rate range signals a departure from the era of ultra-accommodative policies.
  2. Global Implications: Japan now stands as the last central bank to exit negative rates. For years, central bankers worldwide wielded cheap money and unconventional tools. Now, the tide turns. The era of negative rates draws to a close, and other central banks take note.
  3. Market Response: Tokyo’s Nikkei 225 index responded positively, gaining 0.7%. The Japanese yen weakened against the dollar. Investors recalibrate their strategies, adjusting to a world where negative rates are no longer the norm. The Nikkei is sitting close to or at its all-time high!

Nikkei 225 3 month chart at: 40003 – close to its recent new all-time high of 40109

Nikkei 225 3 month chart at: 40003 – close to its recent new all-time high of 40109

The future?

As the BOJ takes its first step toward policy normalization, questions abound. Will further rate adjustments follow? How will markets adapt? And what does this mean for global liquidity?

One thing is certain: The decision of the Bank of Japan resonates beyond the confines of the nation. It heralds the beginning of a new era in which central banks adjust their strategies, economies establish stability, and investors once more chart a course through unfamiliar territory.

Within the chronicles of monetary history, the cessation of negative rates at the Bank of Japan will be marked as a pivotal moment. As the final details of this policy transition are solidified, the global community observes, prepared for the forthcoming developments.

Disclaimer: The views expressed in this article do not constitute financial advice. Readers are encouraged to consult professional advisors before making any investment decisions.

Remember to always do your own research

RESEARCH! RESEARCH! RESEARCH!

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Japan avoids technical recession

Japan GDP

According to the revised official data, the Japan’s gross domestic product (GDP) grew by 0.4% in the fourth quarter of 2023 compared to the same period in the previous year.

According to this revision, the economy avoided a technical recession, which is usually defined as two successive quarters of negative growth.

On Monday 11th March 2024, Japan’s Cabinet Office released figures that indicated a 0.3% decline in private consumption for the quarter. Private consumption accounts for about 60% of the economy.

Nevertheless, the updated figures fell short of expectations, as some economists had predicted a higher revision in Q4.

Nikkei 225 pulls back from recent highs

Nikkei 225 pulls back from recent highs
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Nikkei breaks new ground hitting new all-time high!

New record high!

Japan’s Nikkei 225 index hit a new all-time high on Monday 26th February 2024. In contrast China markets slipped after a nine-day winning streak.

The Nikkei 225 ended 0.4% higher at 39233 comfortably above its previous closing record of 39,098.68. The index breached its 1989 all-time high of 38915 on Thursday 22nd February 2024.

Nikkei 225 hit new all-time high Monday 26th February 2024 – one year chart

Nikkei 225 hit new all-time high Monday 26th February 2024
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Intuitive Machines lands on the moon 22nd February 2024 in historic first for a U.S. company

First U.S. landing on the moon since 1972

A U.S. company has gone to the moon – and creates a little piece of history

Intuitive Machines’ Nova-C cargo lander, named ‘Odysseus’ after the mythological Greek hero, is the first U.S. spacecraft to soft land on the lunar surface since 1972.

Japan, India and China have all had recent successful moon mission ahead of the U.S.

Intuitive Machines is the first company to pull off a moon landing – government agencies have carried out all previously successful missions.

The company’s stock surged in extended trading Thursday, after falling 11% in regular trading.

Lander visual

Hunt for water

The targeted landing site was a cratered terrain next to a 5km-high mountain complex known as Malapert. It’s the southernmost point on the Moon ever visited by a spacecraft.

It’s on the shortlist of locations where Nasa is considering sending astronauts later this decade as part of its Artemis programme.

It is reported that there are some deep craters in this region that never see any sunlight – they’re permanently in shadow – and scientists believe frozen water could be inside them.

Art illustration on Intuitive Machines luna lander

Art illustration on Intuitive Machines luna lander

See other recent moon landings

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Japan’s Nikkei crosses 39000 barrier for the first time

Nikkei 225 index

Japan’s Nikkei 225 hit a record high of: 39098 on Thursday 22nd February 2024.

The rally was propelled by electronics, banking and consumer stocks as robust earnings and investor-friendly measures fuel a blistering rally in Japanese equities.

The Nikkei 225 jumped 2%, surpassing the previous record high of 38,915.87 reached in 1989.

Standout performance

Both the Nikkei and the broader Topix have been standout performers in Asia up more than 10% so far in 2024 after surging more than 25% in 2023. Their best annual gains in at least a decade.

Japan Inc’s solid third-quarter corporate earnings have prompted Bank of America analysts to upgrade their 2024 year-end forecasts for the Nikkei 225 to 41000 from 38500. They raised their forecasts for the Topix to 2,850 from 2,715.

The rally has also been supported by a weaker yen.

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Fact or fiction: More Japanese people have a pet than they do children?

Shiba Inu

It’s true. 2012 statistics show that citizens of Japan registered 21 million or so pets against 16.5 million children (under 15 years).

This is a problem for Japan as it has a growing elderly population. It means Japan has one older person for every three citizens. 33% of the population is elderly and not part of its workforce.

If this trend continues Japan is on course to lose around 40% of its workforce and that is a massive problem for Japan’s economy.

According to a survey conducted by Rakuten Insight in 2023, dogs were the most popular pets in Japan, followed by cats and fish. 

The most popular dog breeds in Japan were toy poodle, chihuahua, and Shiba Inu. Many Japanese people love their pets and treat them as part of their family.

Shiba Inu
More Japanese people have a pet than they do children?