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>The super-long JGB curve inverts beyond 28 years — an odd behavior if fiscal fear is the primary driver.</li>
<li>The strange two-hump shape in the yield curve is a coupon effect: low-coupon bonds issued in the deflation era trade at a premium pulling down the curve.</li>
<li>Investors are not demanding extra yield to hold Japan's longest duration. On the contrary, they are paying a premium for high-duration bonds.</li>
</ul>


The super-long JGB curve inverts beyond 28 years — an odd behavior if fiscal fear is the primary driver.
The strange two-hump shape in the yield curve is a coupon effect: low-coupon bonds issued in the deflation era trade at a premium pulling down the curve.
Investors are not demanding extra yield to hold Japan's longest duration. On the contrary, they are paying a premium for high-duration bonds.


Japan's Fiscal Vigilantes Are Misreading the Curve

<ul>
<li>Japanese industrial production eked out a second straight monthly gain in May (+0.5%), kept afloat by AI hardware — our AI Hardware index is up 14.5% over the past year.</li>
<li>That hardware basket is under 3% of the index yet added 0.7pp since December 2023; without it, production would be down 2.6% rather than 1.9%.</li>
<li>The resilience among Japanese manufacturers is a relief for BoJ officials who have been weighing the economic downside against inflation upside. We expect another rate hike in October to 1.25%.</li>
</ul>


Japanese industrial production eked out a second straight monthly gain in May (+0.5%), kept afloat by AI hardware — our AI Hardware index is up 14.5% over the past year.
That hardware basket is under 3% of the index yet added 0.7pp since December 2023; without it, production would be down 2.6% rather than 1.9%.
The resilience among Japanese manufacturers is a relief for BoJ officials who have been weighing the economic downside against inflation upside. We expect another rate hike in October to 1.25%.


<ul>
<li>The BoJ is turning hawkish to defend a weakening yen, breaking its usual silence by linking the policy rate to the exchange rate in June's Summary of Opinions.-</li>
<li>We bring our next-hike call forward to October 2026 (1.25%), then March 2027 (1.5%), with a hike as early as September if yen weakness persists.</li>
<li>We hold our terminal call at 1.5%, unchanged since September 2025. The June board remains dispersed, with only two clear hawks once Nakagawa departs.</li>
</ul>


The BoJ is turning hawkish to defend a weakening yen, breaking its usual silence by linking the policy rate to the exchange rate in June's Summary of Opinions.-
We bring our next-hike call forward to October 2026 (1.25%), then March 2027 (1.5%), with a hike as early as September if yen weakness persists.
We hold our terminal call at 1.5%, unchanged since September 2025. The June board remains dispersed, with only two clear hawks once Nakagawa departs.


BoJ Steps Up Its Verbal Yen-Intervention: Expect Faster Rate Hikes

<ul>
<li>The BoJ raised its policy rate to 1.0%. Its forward communication signaled that more than one hikes are in store, pointing to at least 1.5% terminal rate or higher.</li>
<li>The majority bloc is turning hawkish even as a likely dove is scheduled to join the board in July. Koeda and Masu are critical swing votes to watch.</li>
<li>JGB purchase will stay level at 2 trillion yen/month from April 2027. Private sector needs to absorb ¥40trn, 6% of GDP, in each the next 4 years.  </li>
</ul>


The BoJ raised its policy rate to 1.0%. Its forward communication signaled that more than one hikes are in store, pointing to at least 1.5% terminal rate or higher.
The majority bloc is turning hawkish even as a likely dove is scheduled to join the board in July. Koeda and Masu are critical swing votes to watch.
JGB purchase will stay level at 2 trillion yen/month from April 2027. Private sector needs to absorb ¥40trn, 6% of GDP, in each the next 4 years.  


BoJ Signals Terminal Rate Is 1.5% or Higher

<ul>
<li>We introduce our BoJ PSI, an index tracking each member's stance on Economy, Inflation and Policy Rate. We attribute anonymous remarks in meeting minutes to individual members to produce PSI. </li>
<li>A proof of concept is Nakagawa Junko's April rate hike dissent, which surprised the market. Our PSI record shows her inflation assessment rising from November 2025 through March 2026.</li>
<li>With a June hike well priced in, the question is the timing of the next hike. Our PSI should provide a transparent way to monitor swing votes, Koeda and Masu. </li>
</ul>


We introduce our BoJ PSI, an index tracking each member's stance on Economy, Inflation and Policy Rate. We attribute anonymous remarks in meeting minutes to individual members to produce PSI. 
A proof of concept is Nakagawa Junko's April rate hike dissent, which surprised the market. Our PSI record shows her inflation assessment rising from November 2025 through March 2026.
With a June hike well priced in, the question is the timing of the next hike. Our PSI should provide a transparent way to monitor swing votes, Koeda and Masu. 


Behind the Votes — Introducing the BoJ Policy Stance Indicator

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Japan Treasury (JAPAN GOVT)

Japan's Fiscal Vigilantes Are Misreading the Curve

Japan's super-long JGB curve inverts due to low-coupon bonds trading at a premium, not fiscal fear. We see evidences that suggest investors are...

Takuji Okubo

Japan IP: A Thin Silicon Lifeline

Japanese manufacturers are keeping its production up despite the global supply chain shock. AI demand is adding a thin but important boost. Such...

Takuji Okubo

BoJ Steps Up Its Verbal Yen-Intervention: Expect Faster Rate Hikes

Faced with a weak yen and upside inflation risk, the BoJ is breaking its taboo on linking rates to the yen. We pull our next two hike calls forward...

Takuji Okubo

BoJ Signals Terminal Rate Is 1.5% or Higher

BoJ signaled the the terminal rate is at least 1.5% or higher. It QT decision is no concession to a fiscally expansive government. 6% to GDP worth...

Takuji Okubo

Behind the Votes — Introducing the BoJ Policy Stance Indicator

Introducing new BoJ policy stance indicator. We attribute anonymous remarks to board members to produce their scores. PSI was able to track...

Takuji Okubo

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japan's Fiscal Vigilantes Are Misreading the Curve

​Japan's super-long JGB curve inverts due to low-coupon bonds trading at a premium, not fiscal fear. We see evidences that suggest investors are...

Takuji Okubo

Japan IP: A Thin Silicon Lifeline

Japanese manufacturers are keeping its production up despite the global supply chain shock. AI demand is adding a thin but important boost. Such...

Takuji Okubo

BoJ Steps Up Its Verbal Yen-Intervention: Expect Faster Rate Hikes

Faced with a weak yen and upside inflation risk, the BoJ is breaking its taboo on linking rates to the yen. We pull our next two hike calls forward...

Takuji Okubo

BoJ Signals Terminal Rate Is 1.5% or Higher

BoJ signaled the the terminal rate is at least 1.5% or higher. It QT decision is no concession to a fiscally expansive government. 6% to GDP worth...

Takuji Okubo

Behind the Votes — Introducing the BoJ Policy Stance Indicator

Introducing new BoJ policy stance indicator. We attribute anonymous remarks to board members to produce their scores. PSI was able to track...

Takuji Okubo

Japan's super-long JGB curve inverts due to low-coupon bonds trading at a premium, not fiscal fear. We see evidences that suggest investors are...