Core Viewpoint - Deutsche Bank warns that Japanese Prime Minister Fumio Kishida's large-scale fiscal spending plan has led to a significant drop in Japanese government bonds and the yen, raising concerns about worsening fiscal conditions and potential capital flight, reminiscent of the UK bond market crisis in 2022 under former Prime Minister Liz Truss [1][3]. Group 1 - The Japanese government is set to announce its largest fiscal stimulus plan since the COVID-19 pandemic, potentially reaching 21.3 trillion yen (approximately 961 billion yuan), which exceeds market expectations [3]. - The yield on Japan's 10-year government bonds has risen to its highest level in decades, while the 30-year bond yield has surpassed 3.35%, up from about 3% earlier this month [3]. - The yen has fallen to its lowest level since January, nearing a threshold that could trigger intervention from the Bank of Japan, which maintains a dovish stance [3]. Group 2 - Deutsche Bank's global foreign exchange research head, George Saravelos, warns that if domestic confidence in the government's and the Bank of Japan's commitment to low inflation erodes, the rationale for purchasing Japanese government bonds will disappear, potentially leading to destructive capital flight [3]. - Saravelos draws parallels between the current market dynamics in Japan and the "Truss storm" in the UK in 2022, where a proposed tax cut plan led to investor panic and nearly destroyed the UK bond market, causing the pound to hit a 37-year low against the dollar [3].

Core Viewpoint - The USD/JPY exchange rate is experiencing fluctuations, currently trading around 153.8000, with a slight decline of 0.19% as the market digests previous gains and awaits further signals regarding interest rate changes in Japan [1][2]. Group 1: Market Dynamics - The USD/JPY opened at 154.1100 and closed the previous trading day at 154.1200, indicating a slight downward movement after reaching an eight-month high due to increased demand for safe-haven assets [1]. - The Bank of Japan's decision to maintain its current policy has created uncertainty regarding the timing of future interest rate hikes, which may limit the appreciation of the yen [1]. - The market is currently cautious, preferring to wait for more information about potential interest rate hikes in December or early next year, especially in light of the new Prime Minister's expected aggressive fiscal spending plans [1]. Group 2: Technical Analysis - The USD/JPY remains below the monthly high resistance zone of 153.25-153.30, with a potential for bearish trading if it breaks below the 152.00 level [2]. - A significant drop below 152.00 could lead to further declines towards the key support levels of 151.10-151.00, confirming a bearish trend [2]. - Conversely, if the USD/JPY can break through the 153.25-153.30 resistance zone, it may attempt to reclaim the 154.00 level, with potential extensions towards 154.50 and 154.75-154.80 [2].

Core Viewpoint - The UK Labour government has announced a significant increase in public spending across key sectors such as healthcare, defense, housing, and transportation, marking a departure from the austerity policies of the previous Conservative government [1][2] Group 1: Spending Plans - The government plans to invest "unprecedented" financial resources in public services from now until 2030, including an annual increase of £29 billion in the National Health Service (NHS) operating budget, with an average real growth rate of 3% [1] - The defense budget is set to rise to 2.6% of GDP by 2027 [1] - A £39 billion investment in affordable housing will be made through a 10-year plan, along with £10 billion in financial support from government housing agencies to attract private capital [1] Group 2: Economic Context - The UK's public debt-to-GDP ratio has exceeded 100%, with government borrowing estimated at £14.83 billion for the last fiscal year [2] - Interest payments on government debt have nearly doubled since 2018, now accounting for almost 10% of total spending [2] - Despite a 0.7% quarter-on-quarter GDP growth in Q1 2025, inflation remains high, indicating a fragile economic recovery [2] Group 3: Challenges and Criticism - Analysts highlight that the execution efficiency and funding effectiveness of the spending plan will be significant challenges for the Labour government [2] - Concerns have been raised regarding the sustainability of large infrastructure investments and whether they will yield sufficient returns to offset rising debt costs [2] - Opposition parties criticize the spending plan as "irresponsible" financially, warning it may lead to speculation about tax increases and could suppress private investment [3]