Offshore
Photo
EndGame Macro
What’s different now is that the market is no longer behaving like it’s under complete BoJ control. You don’t get 10 year yields pushing toward 1.9% and 30 year yields above 3.3% unless investors are repricing an entire regime. Inflation hasn’t vanished, the fiscal footprint keeps growing, and the BoJ is tiptoeing toward normalization without fully committing. It’s the first real sign that the market no longer believes Japan can stay at zero forever, that old assumption is breaking down.
The Wild Card And What Happens If the Global Cycle Turns
But here’s the catch…all of this only holds as long as the world avoids a sharp recession or a deflation scare. If global demand falls apart, Japan is the first country to rip the wheel back toward its old playbook. No economy carries deeper deflation scars. They’re not going to let long term yields sit near 2% while growth contracts and prices fall. In that environment, they’d ramp bond purchases, pin the long end again even if they don’t brand it YCC and do whatever it takes to keep conditions from tightening into a downturn.
So the current spike in yields is meaningful, it signals Japan’s attempt to step out of a three decade regime. But that path only holds if the global cycle stays intact. If it cracks, Japan pivots fast, because they know better than anyone what deflation feels like, and they’re not walking back into it without a fight.
tweet
What’s different now is that the market is no longer behaving like it’s under complete BoJ control. You don’t get 10 year yields pushing toward 1.9% and 30 year yields above 3.3% unless investors are repricing an entire regime. Inflation hasn’t vanished, the fiscal footprint keeps growing, and the BoJ is tiptoeing toward normalization without fully committing. It’s the first real sign that the market no longer believes Japan can stay at zero forever, that old assumption is breaking down.
The Wild Card And What Happens If the Global Cycle Turns
But here’s the catch…all of this only holds as long as the world avoids a sharp recession or a deflation scare. If global demand falls apart, Japan is the first country to rip the wheel back toward its old playbook. No economy carries deeper deflation scars. They’re not going to let long term yields sit near 2% while growth contracts and prices fall. In that environment, they’d ramp bond purchases, pin the long end again even if they don’t brand it YCC and do whatever it takes to keep conditions from tightening into a downturn.
So the current spike in yields is meaningful, it signals Japan’s attempt to step out of a three decade regime. But that path only holds if the global cycle stays intact. If it cracks, Japan pivots fast, because they know better than anyone what deflation feels like, and they’re not walking back into it without a fight.
@HannoLustig The fixation on rate hikes by the BoJ drives me bonkers. The long end of the yield curve is what matters for financial conditions - just like everywhere else - and here the BoJ remains a big buyer in gross terms. What happens with the policy rate is a side show... https://t.co/W3BKiNtIpd tweet
Offshore
Photo
Wasteland Capital
Klarna -47% since IPO day, while S&P500 is at highs. Predatory issuers & VCs keep dumping overvalued sh*t on some of the dumbest American fund managers in existence, while the SEC is asleep.
$KLAR literally missed their first Q numbers post IPO. What a dumb IPO syndicate. https://t.co/4VqekA6ZLT
tweet
Klarna -47% since IPO day, while S&P500 is at highs. Predatory issuers & VCs keep dumping overvalued sh*t on some of the dumbest American fund managers in existence, while the SEC is asleep.
$KLAR literally missed their first Q numbers post IPO. What a dumb IPO syndicate. https://t.co/4VqekA6ZLT
tweet