Articles

Part 1 was the demographic case. Part 2 was the regulatory and activist landscape. This is the spreadsheet. Below book, almost everywhere The Tokyo Stock Exchange’s 2023 directive to companies trading persistently below book value landed on the banking sector like an indictment. Of 79 Japanese banks surveyed by S&P Global, just four had a price-to-book ratio above 1. Half of all Topix stocks still trade below book value, the same proportion as twenty years ago, compared with 3% of the S&P 500. ...

The previous article established the diagnosis. Ninety-nine listed banks, a population shrinking by 900,000 a year, deposit growth at a crawl, non-interest income effectively negative after stripping out equity sales. The patient is stable but deteriorating. This article is about who is reaching for the scalpel. The regulatory starting gun In 2020, the Japan Fair Trade Commission lifted the antimonopoly barriers to same-prefecture bank mergers. The exemption runs for ten years. The clock expires in 2030. ...

When an elderly woman dies in Akita Prefecture, her savings do not stay in Akita. Her children live in Tokyo or Sendai. The inheritance closes a regional bank account and opens one at MUFG, or flows into a NISA brokerage account, or both. Multiply this by 912,000 — last year’s record natural population decline — and you have the regional banking problem in a single transaction. Japan has 99 listed regional banks. Sixty-two tier-one, thirty-seven tier-two. It has five city banks. The country’s population fell by 908,574 Japanese nationals in 2024, the largest annual decline since records began. Only Tokyo grew. All other 46 prefectures shrank. Akita lost 1.91%, Aomori 1.72%, Kochi 1.71%. In Akita, more than 40% of residents are already over 65. By 2050, its population is projected to be 60% of what it is today. ...

For three decades, betting on Japanese banks was an exercise in masochism. Negative rates crushed margins. Balance sheets swelled but profits did not. Then the Bank of Japan started hiking, and the masochists discovered they had been sitting on a convex payoff all along. The three megabanks are on course for record profits. MUFG has guided for 2.1 trillion yen, SMFG for 1.5 trillion, Mizuho for 1.13 trillion. The common explanation is that higher rates mean fatter margins. This is true as far as it goes, which is not very far. ...

This is a follow-up to The Hidden Overall Commander of Operation Epic Fury May Have Been the Treasury Secretary. That piece argued that the economic logic of the operation pointed to Scott Bessent as the architect of its financial constraints. One week later, the framework still holds. But the scenario it depended on is under severe strain. The original thesis rested on a single pivot point: the Strait of Hormuz would reopen quickly, Iranian oil infrastructure — deliberately preserved — would become the basis of a deal, and oil prices would fall far enough to solve five of Bessent’s problems simultaneously. ...

In February 2026, Japanese life insurers sold ¥3.42 trillion in foreign bonds — the sharpest monthly exit since October 2024. The entire Q4 2025 figure, itself the largest quarterly reduction since 2008, was compressed into a single month. The Middle East conflict accelerated this. But the conflict did not cause it. That distinction matters more than most commentary has acknowledged. Why the money is moving Japanese life insurers manage liabilities that extend decades into the future. For most of the past twenty years, meeting those liabilities required reaching offshore for yield that Japan’s financial repression could not provide. US Treasuries, European sovereign bonds, dollar-denominated corporate credit — all of it was a workaround for a domestic market where the Bank of Japan kept yields artificially low. ...

On the night of February 28, 2026, Vice President JD Vance monitored Operation Epic Fury from the White House Situation Room. According to WBUR/AP reporting, he was joined by Secretary of Energy Chris Wright, Director of National Intelligence Tulsi Gabbard, and one person whose presence might seem unusual in a military operation: Treasury Secretary Scott Bessent. Defence Secretary Pete Hegseth called the operation “the most lethal, most complex, and most-precision aerial operation in history.” But I find myself wondering: was this operation designed by the military, or shaped by someone who thinks in bond yields, oil futures, and capital flows? ...

If you own a global index fund, whether it tracks the MSCI All Country World Index or a similar benchmark, you probably think of it as diversified. The word “global” is right there in the name. You own stocks from dozens of countries across every sector. Diversification achieved. Except that is not quite what is happening. As of early 2026, US equities account for approximately 65% of the MSCI ACWI. Within that US allocation, a handful of technology companies, sometimes called the Magnificent Seven, account for a disproportionate share. By some estimates, fewer than ten companies represent over 20% of the entire global index. When you buy a “global” fund, you are making a very large bet on a very small number of American technology stocks. ...

For over a decade, the default recommendation for retail investors worldwide has been simple: buy a global index fund and forget about it. The MSCI All Country World Index — or its close cousin, the S&P 500 — became the intellectual path of least resistance. And for a long time, it worked beautifully. But the conditions that powered that trade are shifting. I believe we are entering a period where Japanese equities will meaningfully outperform global indices. This is not a short-term tactical call. It is a structural argument built on five mutually reinforcing pillars. ...

Between 1995 and 2021, Japan’s average annual inflation rate was approximately 0.2%. For an entire generation, prices were essentially flat or falling. This was not a neutral condition. Deflation corroded the economy from the inside, suppressing wages, discouraging investment, rewarding cash hoarding, and keeping equity valuations perpetually depressed. That era is over. As of December 2025, Japan’s core consumer price index — excluding fresh food but including energy — had remained above the Bank of Japan’s 2% target for 45 consecutive months. The headline CPI averaged 3.2% for calendar year 2025, according to Japan’s Statistics Bureau. Even the “core-core” measure excluding both food and energy — the closest proxy for domestically generated inflation — has been running above 2% for over three years. ...