Gyokuro Time

Within twenty-four hours, the two central banks that matter most for Japanese equity investors held their policy rates steady. The Bank of Japan kept its overnight call rate at 0.75 per cent. The Federal Reserve kept its federal funds rate at 3.50–3.75 per cent. Both decisions were expected. Neither was the story. The story is in the dissents — and in what they reveal about the diverging trajectories of the world’s two largest bond markets, the unwinding of the yen carry trade, and why TOPIX, and Japanese financial stocks in particular, are positioned to outperform global indices through the turbulence ahead. ...

Japan has the one capability the Hormuz coalition lacks most. The legal architecture exists. The existential case is overwhelming. The only variable is political will.

Powell leaves on 15 May. Warsh may not be confirmed in time. The Iran war has ensured this transition will be anything but orderly.

The 1970s parallel for a gold crash requires a Volcker. There is no Volcker in 2026.

On Monday, financial containment appeared to be winning. The Nikkei rallied 2.88%. Oil, which had touched $119 on Brent, collapsed to the high $80s after Trump told CBS News that the war was “very complete, pretty much”. By Wednesday the IEA had announced the largest coordinated oil reserve release in its history: 400 million barrels from 32 member nations. The US contributed 172 million barrels from the SPR. Japan committed 80 million barrels, its first solo reserve release since 1978. Bessent unsanctioned Russian crude stranded on the water, creating additional supply at the stroke of a pen. G7 energy ministers convened in Paris. Trump declared victory. ...

On Thursday morning, the Japanese Ministry of Finance released its weekly International Transactions in Securities data covering March 1 to 7, the first full week of the Iran war. Within hours, a widely shared post on X announced: the BOJ had sold ¥400 billion in foreign bonds. The carry trade was still unwinding into the oil shock. This reading is wrong on every count. The data in question comes from Section 1 of the MOF release: Portfolio Investment Assets, which tracks transactions by Japanese residents, not the Bank of Japan. The BOJ’s foreign reserve operations are excluded from this dataset entirely. The ¥400 billion figure was a net purchase of foreign long-term debt securities by Japanese institutional investors. Positive in Section 1 means net acquisition, not net disposition. The sign convention changed in January 2014: plus now denotes buying, not selling. ...

Two days ago, this blog argued that Bessent held the line but the line was thinner. On Tuesday, Iran began laying mines in the Strait of Hormuz. On Wednesday, the IEA announced the largest emergency oil release in its history: 400 million barrels. Brent crude barely flinched, settling around $93. The containment failed. Not because Bessent’s tools were wrong, but because mines changed the physics of the problem. Why mines changed everything The market had been pricing a scenario: Hormuz reopens when the shooting stops. Trump says the war is “very complete.” Escorts arrive. Tankers resume. Oil falls. That was the trade on Monday, when the Nikkei bounced 2.88% and Brent dropped from $119 to $88. ...

The Bank of Japan’s policy board meets on March 18–19 with the overnight rate at 0.75%, the highest in thirty years. The market expects a hold. The decision itself is not the story. The language is. Two forces are pulling in opposite directions, and the words the BOJ chooses to describe the balance between them will determine whether April remains a live meeting or whether the next hike slips to June or beyond. ...

Ten days ago, Brent crude was $66. On Monday it touched $119.50 before settling around $93. The Nikkei 225 fell 5.2% on Monday. USD/JPY hit 159.14, one tick from what traders regard as the Ministry of Finance intervention threshold. The UST 10-year yield briefly breached 4.21% before pulling back to 4.13%. And yet the financial system did not crack. This article examines what Scott Bessent spent to keep it that way, what it reveals about the yen’s role in a crisis, and why his binding constraint — the 10-year yield — is tighter now than it was before the first missile was launched. ...

In the alphabet soup of financial metrics, few are as obscure—or as revealing—as Embedded Value (EV). While equity investors worldwide obsess over PER and PBR, a handful of listed Japanese life insurers are quietly trading at 60 to 70 cents on the yen of their intrinsic worth, measured by a yardstick that almost nobody outside the insurance sector bothers to learn. That is about to matter. Japan’s interest-rate regime is shifting. Its population is ageing into a demographic structure that demands more, not less, private insurance. And the regulatory apparatus that suppressed insurer profitability for two decades is now, paradoxically, creating the conditions for outsized returns. Understanding why requires a detour through the peculiar economics of life insurance—and a valuation framework that most retail investors have never encountered. ...