Core Viewpoint - The article discusses the significant depreciation of the Japanese yen under the new Prime Minister, indicating that the economic policies being implemented are more about political survival than sound economic management [2][12]. Economic Policy - The economic strategy termed "Kishida Economics" involves excessive borrowing for stimulus and maintaining low interest rates, with Japan's debt reaching 260% of its GDP [4][9]. - The government continues to issue bonds, with the total amount reaching 21 trillion yen, while the central bank is pressured to maintain a zero interest rate and increase monetary easing [4][9]. Currency Depreciation - Following the election of Prime Minister Kishida, the yen depreciated by 5%, with the exchange rate against the US dollar hitting 155.37 and against the euro falling below 180, marking the weakest levels since the euro's inception [4][7]. - The depreciation of the yen is not benefiting exports as expected, with Japanese export orders declining for 44 consecutive months and manufacturing PMI dropping to 48.2, indicating a contraction [7][9]. Debt and Inflation - The yield on Japan's 10-year government bonds surged to 1.8%, the highest since the 2008 financial crisis, while the 40-year bond yield reached a historic peak of 3.747% [7]. - Core CPI in Japan has exceeded the 2% target for 36 months, leading to a situation where prices rise but wages do not, effectively eroding the purchasing power of the populace [10][12]. Political Implications - The article suggests that the current economic policies are driven by political interests, with the government prioritizing short-term performance metrics over long-term economic stability [10][12]. - The reliance on monetary expansion and debt accumulation is characterized as a dangerous gamble, with the potential for severe consequences if international capital withdraws or if public patience runs out [12][13].

Core Viewpoint - Japan's stock prices, yen exchange rate, and government bonds have all experienced significant declines, attributed to the economic policies of Prime Minister Kishi Sanae, leading to market disappointment and concerns over fiscal sustainability [1][3][4]. Group 1: Market Performance - The Nikkei average fell below 50,000 points on November 18 and dropped to around 48,000 points by November 21 [1]. - The yen depreciated over 6% following Kishi Sanae's appointment, reaching an exchange rate of 157 yen per dollar by November 21 [1]. - Long-term government bond yields exceeded 1.83% on November 20, marking a decline in trading prices to levels not seen in 17 years [1]. Group 2: Economic Policy Analysis - Initial optimism surrounding Kishi Sanae's economic policies, dubbed "Sanae Economics," has waned as the current economic conditions differ significantly from those in 2013 [3]. - Japan's national debt exceeds twice its GDP, limiting the government's ability to implement aggressive fiscal and monetary policies [3]. - The government's recent economic measures, including a supplementary budget of 21.3 trillion yen, have raised concerns about fiscal discipline and sustainability [4][5]. Group 3: Fiscal Challenges - The supplementary budget's scale is unprecedented compared to pre-COVID levels, reflecting Kishi Sanae's commitment to active fiscal policies [4]. - Critics argue that the government's focus on crisis management investments, which constitute one-third of the supplementary budget, detracts from addressing rising prices effectively [5]. - The lack of fiscal discipline may lead to increased government debt and further depreciation of the yen, exacerbating inflationary pressures [6]. Group 4: Monetary Policy Outlook - Market pressures have prompted Kishi Sanae to indicate a willingness to allow the Bank of Japan to raise interest rates, with expectations for a decision as early as December [6]. - Persistent domestic inflation is seen as a primary reason for potential interest rate hikes, which could help stabilize the yen [6].

Group 1 - Japanese Prime Minister Sanae Takaichi's remarks on Taiwan and historical issues are seen as detrimental to regional stability and Japan's own interests [1] - Takaichi's policies are perceived as neglecting public welfare while aligning closely with the U.S., aiming for military expansion despite high inflation in Japan, which may lead to risks of yen depreciation and economic instability [1] - Criticism from mainstream media, the public, and opposition parties suggests that her rhetoric is inciting war and undermining trust with neighboring countries, raising concerns about her administration's future [1] Group 2 - The Japanese tourism industry is facing significant challenges due to a surge in cancellations of Chinese tourist bookings, with cancellations reaching 70% of overall orders within two days [3] - Hokkaido, a key destination for Chinese tourists, is experiencing a notable decline in visitor numbers, impacting local businesses such as hotels and tour services [3][4] - Predictions indicate that the cancellation of Chinese tourist bookings could lead to a reduction in Japan's tourism revenue by approximately 1.79 trillion yen (about 11.5 billion USD) over the next year, potentially decreasing Japan's GDP by 0.29% [4] Group 3 - The cancellation of the trilateral cultural minister meeting between China, Japan, and South Korea is attributed to rising tensions following Takaichi's comments, with China condemning her statements as harmful to regional cooperation [5] - The Nikkei 225 index fell by 2.4% to 48,625.88 points, marking a weekly decline of 3.48%, with significant drops in major stocks, particularly in the AI sector [5] Group 4 - The Bank of Japan's Governor, Kazuo Ueda, indicated that the central bank must consider the impact of a weak yen on import costs and inflation, suggesting potential tightening of monetary policy to support the yen [7] - Concerns are raised about the volatility in the Japanese market, which is perceived as more alarming than recent fluctuations in the U.S. stock market, with warnings of potential capital flight if investor confidence wanes [7]

Core Viewpoint - The newly elected Japanese Prime Minister, Sanae Takaichi, faces significant market challenges as her proposed large-scale stimulus plan raises concerns about Japan's fiscal health, leading to a decline in the stock market and the yen [1][3][4]. Group 1: Market Reactions - The Japanese stock market, previously buoyed by the "Takaichi trading" phenomenon, has seen a significant drop, with the Nikkei 225 index experiencing its largest decline since April, falling over 3% [1][3]. - The yen has depreciated to its weakest level against the dollar since January, trading around 157 yen per dollar, with fears that it could fall further [4][12]. - Long-term Japanese government bond yields have reached their highest levels in decades, indicating rising concerns over fiscal policy and potential market instability [8][9]. Group 2: Economic Policy Concerns - Takaichi's government is expected to unveil a stimulus plan exceeding 13.9 trillion yen, with some lawmakers advocating for an even more aggressive 25 trillion yen budget [7][8]. - The cancellation of the goal for a balanced annual budget and a focus on reducing shareholder emphasis in corporate governance have raised alarms among international investors [6][12]. - Analysts warn of a potential "triple decline" scenario where the stock market, bond market, and yen all continue to fall simultaneously, reminiscent of past market turmoil in the UK [8][9]. Group 3: Investor Sentiment - There is a growing sentiment among investors that if Takaichi loses credibility in her policy decisions, it could lead to widespread asset sell-offs in Japan [3][6]. - Despite some short-term rebounds in the stock market, the overall performance of Japanese equities remains lackluster compared to global indices, indicating a disconnect between currency depreciation and stock performance [13][14]. - Some investors believe that Takaichi's spending plans could eventually support Japanese equities, but there are concerns that overheating the economy could necessitate interest rate hikes, complicating the market outlook [14].

Economic Context - Japan's economy is facing significant challenges, with the latest data showing a 1.8% decline in real GDP for Q3, marking a return to negative growth since Q1 2024 [1] - The decline is attributed to both external and internal pressures, including a four-month contraction in exports due to U.S. tariffs and a slowdown in private consumption growth from 0.4% to 0.1% [1] - Rising living costs have led to stagnant real wages, causing households to cut discretionary spending [1] Inflation and Wages - Tokyo's core consumer price index rose by 2.8% year-on-year in October, exceeding the Bank of Japan's 2% inflation target [2] - The price of rice has surged dramatically, with a 5 kg bag increasing from over 3,000 yen to 5,000 yen within a year [2] - Real wages adjusted for inflation fell by 1.4% in August, marking the eighth consecutive month of decline [2] Social Structure and Inequality - Japan is experiencing a pronounced wealth gap, with average savings for single individuals in their 20s, 30s, and 50s being 1.76 million, 4.94 million, and 10.48 million yen, respectively, while the median savings are significantly lower at 200,000, 750,000, and 530,000 yen [3] - This disparity illustrates the severe reality of wealth inequality in Japan, characterized as an "M-shaped society" where wealth distribution is polarized [4] Policy Responses and Critiques - The new Prime Minister, Sanna Takashi, is attempting to address these structural issues through "responsible active fiscal policy," which resembles the previous Abenomics approach, including quantitative easing and a temporary freeze on fiscal surplus targets [8] - Critics argue that such policies may exacerbate wealth inequality, primarily benefiting high-income earners and large corporations, while failing to address the root causes of economic stagnation [9] - The government's historical missteps in recognizing and addressing the long-term recession have led to a massive public debt of 1,000 trillion yen, which the populace ultimately bears the burden of [5] Societal Implications - The entrenched M-shaped society is leading to deeper social issues, including intergenerational poverty and a declining birth rate, as young people face economic pressures that discourage family formation [6][7] - The cycle of low wages and economic stagnation has created a "failed generation" among educated youth, who may opt out of the workforce or family life due to lack of financial security [6][7]

Core Viewpoint - Investors are on high alert regarding the unexpectedly weak demand for Japan's 20-year and 40-year government bond auctions, particularly ahead of the new government's economic stimulus plan under Prime Minister Kishi Sanae [1][2] Group 1: Bond Market Dynamics - The yield on Japan's 20-year government bonds rose to 2.815%, marking the highest level since 1999, driven by concerns over increased fiscal spending plans that may significantly boost inflation and exacerbate Japan's already heavy debt burden [1] - The 40-year bond yield surged by 8 basis points to its highest level since its public market debut in 2007, indicating heightened market volatility [1] - The bid-to-cover ratio for the previous 20-year bond auction was 3.56, compared to a 12-month average of 3.30, suggesting potential weakness in upcoming auctions [4] Group 2: Economic and Fiscal Concerns - A faction within the ruling Liberal Democratic Party is urging the government to prepare a substantial budget of approximately 25 trillion yen (about 161 billion USD) to support the forthcoming stimulus plan [4] - Recent data showed a contraction in Japan's GDP for the last quarter, providing justification for the government's push for significant fiscal expansion [4] - Analysts from Goldman Sachs noted that as investors grow increasingly wary of the potential scale of stimulus exceeding market expectations, Japan's fiscal risk premium is returning, which could exert significant selling pressure on long-term sovereign bonds and the yen [4] Group 3: Global Market Implications - Amundi's recent report indicated that due to concerns over increased borrowing by the new Prime Minister, yields on long-term Japanese government bonds may reach new historical highs in the coming months [5] - The potential for a "Japanese bond sell-off storm" could re-emerge, reminiscent of past market disruptions, if long-term bond yields rise sharply [5] - The "Sanae trade" reflects market expectations for a revival of "Abenomics," characterized by stronger fiscal stimulus, industry support, and a cautious stance on monetary tightening, leading to significant fluctuations in the stock, bond, and currency markets [6]

Group 1 - The USD/JPY exchange rate is hovering near a nine-month high, currently reported at 155.4200, with a slight decline of 0.05% [1] - Japan's Q3 GDP contracted by 1.8% year-on-year, marking the first decline in six quarters, which has put pressure on the yen [1] - Concerns regarding Japan's fiscal policy are growing, particularly with Prime Minister Takaichi's push for large-scale fiscal stimulus and increased bond issuance, which continues to pressure Japanese government bonds (JGBs) and the yen [2] Group 2 - Despite indications from Bank of Japan Governor Ueda about a potential interest rate hike, traders are not yet prepared to significantly buy the yen [2] - The Alligator indicator shows an upward trend for the USD/JPY exchange rate, confirming current bullish momentum, with potential resistance at 156 [3] - If the bulls can maintain the 155 level, the USD/JPY exchange rate may continue its upward trend; however, a drop below 155 could trigger a pullback to the 154 support level [3]

Group 1 - The Philippine economy is expected to slow down in the second half of 2025 and into 2026 due to multiple internal and external pressures, including natural disasters, governance issues, and reduced fiscal spending, alongside the impact of U.S. tariff policies [1][2] - Goldman Sachs warns that the current stock market rally driven by AI hype may be overly optimistic, with many potential earnings already reflected in stock prices, leading to inflated revenue and profit expectations [1][2] - The Bank of America survey indicates that 45% of respondents view the AI bubble as the biggest tail risk, while 54% consider the "Magnificent Seven" stocks as the most crowded trade, suggesting a potential market correction if the Federal Reserve does not cut interest rates [3] Group 2 - The Singapore Monetary Authority is likely to maintain its current policy in 2025 to retain flexibility amid ongoing global uncertainties, aligning with a near-closed output gap and moderate inflation recovery [4] - Franklin Templeton analysts suggest that a pause in interest rate cuts by the Federal Reserve could lead to a stronger dollar and flatten the U.S. Treasury yield curve, potentially suppressing previously favorable investment opportunities [4][5] - The private credit market is facing structural risks similar to those before the 2008 financial crisis, with significant growth from $46 billion to $1.7 trillion over the past decade, and projections of reaching $3 trillion by 2026 [3]

Core Viewpoint - The USD/JPY exchange rate is influenced by the divergence in monetary policies between the US and Japan, supported by government bond yield differentials and technical factors, leading to uncertainty in the currency's direction [1][2] Group 1: Monetary Policy and Economic Indicators - The Bank of Japan, under Governor Ueda, maintains an accommodative stance to support recovery, while the new Prime Minister, Sanna Takagi, continues "Abenomics," reducing expectations for interest rate hikes by year-end [1] - The policy interest rate in Japan is 0.5%, with a differential of over 300 basis points compared to the US Federal Funds Rate, attracting funds for carry trades that support the exchange rate [1] - Despite weaker data in October raising the probability of a Fed rate cut to 60%, the resolution of the government shutdown has improved risk appetite, diminishing the safe-haven demand for the yen [1] Group 2: Technical Analysis - The current exchange rate is in a consolidation phase, with the 154 level being crucial for both bulls and bears; after hitting a low of 152.80 on November 7, the rate rebounded to 154.49 on the 14th, indicating solid support [2] - Technical indicators show bullish signals, with the RSI remaining above 50, and the 20-day moving average around 152.52 providing dual support; a pullback to this level may attract buyers [2] - Resistance levels are identified at 154.48 and 154.83; a breakthrough above 154.83 could target the 155 level, with some institutions predicting a potential rise to 160 by year-end [2]

Economic Background - Japan's economy is experiencing a mild recovery under persistent re-inflation, contrasting with the deflationary stagnation faced by former Prime Minister Abe Shinzo[8] - The Consumer Price Index (CPI) growth peaked at 4% in 2022, driven primarily by high food and energy prices, with inflation remaining above the Bank of Japan's 2% target[9] - Domestic demand has been the main driver of GDP growth, contributing over 1 percentage point to actual GDP since Q3 2024, while external demand has weakened due to tariff impacts[13][19] Policy Outlook - The new Prime Minister, Takashi Sanae, aims for an "expansionary but responsible fiscal policy," with expectations of a rising fiscal deficit ratio in 2026, constrained by debt risks[30] - Monetary policy is expected to remain accommodative, with the Bank of Japan likely to raise interest rates by 30-50 basis points in 2026, despite a cautious stance[35] - Strategic investments in 17 key industries, including AI and semiconductors, are planned to stimulate growth over the next five years[30] Market Impact - The "Takaichi Trade" has emerged, characterized by rising Japanese stocks and weakening yen and bonds, with expectations of a bullish stock market and bearish bond and currency outlook for 2026[40] - The Nikkei 225 index has seen a 26% increase from January to November 2025, driven largely by technology stocks, which contributed approximately 70% of the gains[49] - Japanese government bonds are expected to face upward yield pressure due to ongoing fiscal expansion and reduced demand from domestic and foreign investors[40] Risks and Challenges - The government faces significant political pressure, limiting the effectiveness of policy implementation, as the ruling coalition lacks a majority in the Diet[39] - External shocks, particularly from U.S. tariff policies, are likely to continue impacting Japan's export sectors, especially in automotive and electronics[22][25] - Input inflation remains a challenge, potentially constraining consumer spending and complicating wage growth dynamics[20]