Articles

Nippon Life booked ¥500 billion in domestic bond losses in the first half of fiscal 2025. The same firm posted a record ¥1.01 trillion in basic profit for the year. Both figures come off the same balance sheet, and the market has yet to decide which to believe. Earlier this year this blog argued that Japan’s listed life insurers look structurally cheap on embedded value. Daiichi Life Group (8750), renamed from Dai-ichi Life Holdings on 1 April 2026, and T&D Holdings (8795) trade at 0.6 to 0.7 times P/EV, while European peers change hands at 0.8 to 1.0. One paragraph of that piece brushed past the growing unrealised losses on domestic bond holdings. Accounting noise, it said. Economic substance elsewhere. ...

There are two kinds of statement a finance minister makes: the spoken and the withheld. When America’s treasury secretary, Scott Bessent, met his Japanese counterpart, Satsuki Katayama, in Washington on 15 April, the unspoken carried the weight. When the two last met, in January, the Treasury’s readout noted that Mr Bessent “emphasized the need for sound formulation and communication of monetary policy”, diplomatic code for pressing the Bank of Japan to raise rates. That sentence is absent from the April readout. Ms Katayama, for her part, told reporters that the two ministers had not discussed monetary policy. ...

Scott Bessent worked at Soros Fund Management across two stints between 1991 and 2015, doing one thing supremely well: spotting the moment when a central bank had mispriced risk and the speculative position on the other side was too large to unwind gracefully. When that moment came, the correction was violent. The people positioned for it made fortunes. Bessent was one of the best. Now he runs the US Treasury. Japan holds roughly $1.2 trillion of American government debt, the largest foreign position — a mix of official reserves and private institutional holdings. If the yen weakens far enough, the private side of that equation starts to shift: life insurers and pension funds find hedging costs too high to justify holding US bonds, and new purchases dry up. US borrowing costs rise. ...

Go to any Japanese supermarket and pick up a round box of Snow Brand Megmilk’s “6P Cheese.” Open it and you will find six silver-wrapped wedges of processed cheese arranged like pie slices. The product has been sold in Japan since 1954 – a national staple that appears in children’s lunchboxes, office bento and late-night snacks with a beer. Every Japanese person knows it. When 6P Cheese launched in 1954, a box weighed 170g and each wedge was 19mm thick. In 2026, it weighs 102g and the wedges are 11mm. The diameter of the round box has not changed. Only the contents have shrunk: 40% over 70 years. ...

Energy costs are rising. Interest rates are rising. Raw material costs are rising. All three are happening at once, and all three trace back to the same chokepoint: the Strait of Hormuz, effectively closed since 28 February and still not reopened despite the 8 April ceasefire. In a country that imports 94.2% of its crude from the Middle East, there is no path to consumption growth while this persists. This blog has been bullish on Japan: rising wages, the end of deflation, corporate governance reform. That broad view is not being abandoned. But the hope that the “new Japan” narrative extends to domestic consumption is not supported by the data. The structural reasons why Japan’s policy response is inadequate are explored in a companion piece, The Shrinkflation State. This article traces the macro data and its implications for corporate earnings. ...

Japan’s record ¥122.3 trillion budget passed on 7 April. Domestic media are busy picking ‘Takaichi stocks’ in defence and semiconductors. But the financial statements of the supposed beneficiaries tell a different story – and the budget’s largest single outflow goes not to growth investment but to debt service, enriching the banks and life insurers who underwrite it.

Japan’s budget passed. The ceasefire is collapsing. Katayama’s intervention window is open for the first time since she took office.

The incentive structure around US Gulf policy resembles a sold put on regional stability. The licensing portfolio, the 10-year yield and the petrol price all sit on the same side of the strike. The gamma is short. The implications reach the BOJ. This blog has spent the past month tracking Bessent’s financial containment of the Iran crisis: the SPR releases, the unsanctioned crude, the yield curve management. A question that keeps surfacing is whether the Trump Organization’s commercial presence in the Gulf reinforces that containment bias. ...

Scott Bessent has a problem his administration built for him. The Iran war launched on 28 February closed the Strait of Hormuz, removed roughly a fifth of the world’s daily oil supply and pushed Brent above $109 a barrel. The UST 10-year yield has risen to about 4.37%. Markets price zero Fed rate cuts for the rest of the year. Mortgage rates are climbing back toward levels that cost his party seats in previous cycles. ...

In 1274, a Mongol-Korean invasion force landed at Hakata Bay in northern Kyushu. Japan’s samurai, trained for single combat, were routed by massed formations wielding gunpowder weapons they had never seen. A storm forced the invaders to withdraw, but the lesson was plain: the existing military model would not survive a second attempt. The Kamakura shogunate spent the next seven years preparing. It built a 20km stone seawall along Hakata Bay, developed small-boat night-raiding tactics and established Japan’s first permanent coastal defence force. When a far larger invasion arrived in 1281, the seawall held. The Mongol fleet sat offshore for weeks, unable to land. Then a typhoon struck and finished what Japanese preparation had started. ...