🚨 Major Shift: Japan’s Inflation Surpasses U.S. for First Time in 46 Years
🇯🇵 This just in: Japan's inflation rate has moved 3.0% above U.S. inflation—something we haven’t seen since the 1970s.
Why this isn’t just another data point:
· This jump puts the Bank of Japan under serious pressure to finally raise interest rates after years of ultra-loose policy.
· Higher BOJ rates could unwind the famous yen carry trade, where investors borrow cheap yen to invest in higher-yielding global assets.
· History shows that every 1% inflation gap vs. the U.S. has led to roughly $100 billion in Japanese bond selling.
· That kind of move drains global liquidity, which often hits stocks, credit, and other risk assets before spreading more broadly.
With markets already tense, reduced liquidity tends to fuel higher volatility. It’s a shift worth watching closely, especially for portfolios sensitive to global capital flows.
📈 Additional context
This shift may also encourage Japanese investors to bring capital home, seeking better returns domestically. That could further tighten liquidity abroad and add pressure to global bond markets—particularly U.S. Treasuries—just as other central banks are navigating their own policy challenges.
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