Boj

Predicting when a finance minister will intervene in the currency market is a fool’s errand. The MOF does not publish a schedule. The whole point of intervention is surprise: catching speculators wrong-footed, inflicting maximum pain per yen spent. Anyone claiming to know the date is selling you something. And yet. The decision to intervene is not made in a vacuum. It requires political clearance, diplomatic coordination and tactical conditions that do not appear on demand. These constraints are visible. They can be mapped against a calendar. The result will not be a date circled in red but a window, the period during which the political stars align and the MOF gains the freedom to act. ...

In a long-form interview from the Treasury’s Cash Room on 13 March, a week before the worst single-session bond selloff of his tenure, Bessent compared himself to a lifeguard. Drowning people pull you under, he told the interviewer. Your goal is always to save them. For fourteen months he has had solid ground. When JGB yields spiked in January on fiscal fears around the Takaichi snap election, he called Tokyo and the stress faded within days. When the carry trade wobbled in January, a Fed rate check on dollar-yen was enough. Those problems originated in places he could reach. ...

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. ...

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 18 March–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. ...

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. ...

Two reflationist academics, Toichiro Asada of Chuo University and Motohiro Sato of Aoyama Gakuin University, have been nominated to the Bank of Japan’s Policy Board. The market’s initial reaction was predictable: the Takaichi government is signalling that it wants to slow rate hikes. The yen weakened, stocks rose, and long-dated bond yields steepened. A textbook reflationist repricing. But there is another way to read these appointments. And which reading proves correct has meaningful implications for how you position in Japanese equities. ...

The Japanese yen has weakened dramatically against the dollar and the euro over the past four years, falling from roughly 110 to the dollar in early 2021 to above 155 by late 2025. For Japanese investors, this has been painful. For American and European investors, it may be something quite different: an entry point. Currency movements are notoriously difficult to predict, and anyone who claims certainty about where the yen is headed should be treated with scepticism. But the structural forces that drove the yen to multi-decade lows are beginning to shift, and investors who understand those forces can make a more informed judgement about whether yen-denominated assets belong in their portfolio. ...