Macro, FX and Rates Strategist

Ishaan Dev Kapoor

FX & Rates

<ul>
<li>Japan's 30-year yields 4.16%, 236 basis points over the Bank of Japan's neutral midpoint. Part is fiscal premium; the rest is the price of a domestic bid returning at 4%</li>
<li>Post-Covid inflation was supply-driven, imported through the yen, oil and food. Inflation excluding food and energy never exceeded 2.7%. Real wages are rising, consumption grows 1%: neutral, not above it.</li>
<li>The buyers' strike is ending. Life insurers sold ¥2.1 trillion of super-longs in FY2025 and are buying again; Meiji Yasuda doubled its plan; GPIF is pressed to add domestic assets.</li>
</ul>


Japan's 30-year yields 4.16%, 236 basis points over the Bank of Japan's neutral midpoint. Part is fiscal premium; the rest is the price of a domestic bid returning at 4%
Post-Covid inflation was supply-driven, imported through the yen, oil and food. Inflation excluding food and energy never exceeded 2.7%. Real wages are rising, consumption grows 1%: neutral, not above it.
The buyers' strike is ending. Life insurers sold ¥2.1 trillion of super-longs in FY2025 and are buying again; Meiji Yasuda doubled its plan; GPIF is pressed to add domestic assets.


Priced for a Japan That Has Not Existed Since 1991, Long the 30-Year JGB at 4.16%

Japan Economist, Japan Macro Advisors

Takuji Okubo

Japan Economist

Concise and Insightful Analysis on Japan Economy

Japan Macro Advisors

Our mission is to provide a concise and timely analysis on the Japanese economy for the benefit of global audiences. Communication, especially in foreign languages, has always been a weakness for the Japanese, which was fine when Japan's economic might attracted foreign media and various other institutions to study and report on Japan - such days are long gone. In the last two decades, we saw foreign institutions reallocating their resources from Japan to other more exciting parts of the world. As a result, when we read reporting on Japan in foreign media, we sense a subtle but noticeable decline in the depth of understanding what is actually happening in Japan.

Macroeconomics

<ul>
<li>Bank of Japan likely to remain on hold till January 2026 with risk of further delay </li>
<li>Once BoJ resumes hiking cycle, it will likely follow twice a year pace till 1.5% </li>
<li>With the Fed cutting rates, the long end of the JGB curve is firmly anchored</li>
</ul>


Bank of Japan likely to remain on hold till January 2026 with risk of further delay 
Once BoJ resumes hiking cycle, it will likely follow twice a year pace till 1.5% 
With the Fed cutting rates, the long end of the JGB curve is firmly anchored


<ul>
<li>June Tankan beat expectations. AI-boom-led-demand is outweighing the negative shock from Middle East supply chain disruption. May industrial production, released this morning, showed Japanese manufacters benefiting from AI boom. </li>
<li>More consequentially, the Tankan survey delivered more evidence for the ongoing rise in inflation expectation. Large firms' five-year inflation expectations are now higher than the BoJ's 2% target </li>
<li>We expect faster rate hikes — 1.25% in October, 1.5% by March 2027. Stronger business conditions cut the downside risk; rising expectations affirm the upside inflation risk.</li>
</ul>


June Tankan beat expectations. AI-boom-led-demand is outweighing the negative shock from Middle East supply chain disruption. May industrial production, released this morning, showed Japanese manufacters benefiting from AI boom. 
More consequentially, the Tankan survey delivered more evidence for the ongoing rise in inflation expectation. Large firms' five-year inflation expectations are now higher than the BoJ's 2% target 
We expect faster rate hikes — 1.25% in October, 1.5% by March 2027. Stronger business conditions cut the downside risk; rising expectations affirm the upside inflation risk.


BoJ Tankan: Signs of Continued Reflation Open Doors to Additional BoJ Rate Hikes

<ul>
<li>Koeda hardened her inflation assessment in today's Fukuoka speech, saying underlying inflation is already around 2% and naming upside risk explicitly for the first time.</li>
<li>Markets may read this as a hawkish June signal. We disagree: Middle East impact is not yet in hard data, and her rate language stays in the executive camp.</li>
<li>Our call is June hold. BoJ majority remains data-dependent. Some data do arrive, such as consumer indicators Koeda mentioned today. But key data such as Tankan arrives after June 16. </li>
</ul>


Koeda hardened her inflation assessment in today's Fukuoka speech, saying underlying inflation is already around 2% and naming upside risk explicitly for the first time.
Markets may read this as a hawkish June signal. We disagree: Middle East impact is not yet in hard data, and her rate language stays in the executive camp.
Our call is June hold. BoJ majority remains data-dependent. Some data do arrive, such as consumer indicators Koeda mentioned today. But key data such as Tankan arrives after June 16. 


BoJ Koeda: Another Question Mark on June Hike

<ul>
<li>Most of the historic rise in JGB yields between 2022-26 came from long-run inflation expectation change and a normalization of term premia (TP) as BoJ lifted its unconventional easing.</li>
<li>TP across the yield curve has largely finished its normalization process, in particular at the longest end. TP at 10-year has a moderate room to expand further.</li>
<li>We think the hiking cycle in Japan is already in a late phase. Typically, the longer end of the yield curve starts to decline in a late cycle.</li>
</ul>


Most of the historic rise in JGB yields between 2022-26 came from long-run inflation expectation change and a normalization of term premia (TP) as BoJ lifted its unconventional easing.
TP across the yield curve has largely finished its normalization process, in particular at the longest end. TP at 10-year has a moderate room to expand further.
We think the hiking cycle in Japan is already in a late phase. Typically, the longer end of the yield curve starts to decline in a late cycle.


The Long Climb in JGB Yields Is Nearly Over

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Japan Treasury (JAPAN GOVT)

Priced for a Japan That Has Not Existed Since 1991, Long the 30-Year JGB at 4.16%

The 30-year JGB is priced for an economy Japan has not had since 1991. The insurers are back, the GPIF is being told to buy, and 4% is the level....

Ishaan Dev Kapoor

Japan Macro: Restarting Coverage

BoJ expected to keep rates on hold until January 2026, potential for delay. When hiking resumes, pace likely to be twice a year until reaching...

Takuji Okubo

BoJ Tankan: Signs of Continued Reflation Open Doors to Additional BoJ Rate Hikes

June Tankan revealed better-than-expected business condition and a rise in inflation expectation. Such news call for faster rate hikes. We forecast...

Takuji Okubo

BoJ Koeda: Another Question Mark on June Hike

BoJ Koeda shifted hawkish on inflation but says Middle East impact not yet in hard data. June hold. July 30–31 the more natural window for the next...

Takuji Okubo

The Long Climb in JGB Yields Is Nearly Over

JGB yields saw a historic rise between 2022-2026. Most of the rise came from higher inflation expectations and a normalization of term premia. Our...

Takuji Okubo

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Priced for a Japan That Has Not Existed Since 1991, Long the 30-Year JGB at 4.16%

The 30-year JGB is priced for an economy Japan has not had since 1991. The insurers are back, the GPIF is being told to buy, and 4% is the level....

Ishaan Dev Kapoor

Japan Macro: Restarting Coverage

​BoJ expected to keep rates on hold until January 2026, potential for delay. When hiking resumes, pace likely to be twice a year until reaching...

Takuji Okubo

BoJ Tankan: Signs of Continued Reflation Open Doors to Additional BoJ Rate Hikes

June Tankan revealed better-than-expected business condition and a rise in inflation expectation. Such news call for faster rate hikes. We forecast...

Takuji Okubo

BoJ Koeda: Another Question Mark on June Hike

BoJ Koeda shifted hawkish on inflation but says Middle East impact not yet in hard data. June hold. July 30–31 the more natural window for the next...

Takuji Okubo

The Long Climb in JGB Yields Is Nearly Over

JGB yields saw a historic rise between 2022-2026. Most of the rise came from higher inflation expectations and a normalization of term premia. Our...

Takuji Okubo

BoJ expected to keep rates on hold until January 2026, potential for delay. When hiking resumes, pace likely to be twice a year until reaching...