Japan

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.

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. ...

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. ...

If your portfolio looks like most Western retail investors’ portfolios, it is heavily allocated to US equities, probably through an index fund that gives you roughly 65% exposure to American companies. That allocation has served you well for the past decade. The question is whether it will continue to do so, and whether you are missing something by not looking elsewhere. Goldman Sachs, JPMorgan, BlackRock, Janus Henderson, Invesco, and Daiwa Asset Management have all published constructive outlooks on Japanese equities for 2026. These are not speculative calls from boutique firms. These are the largest asset managers and investment banks in the world, and they are allocating real capital. ...

On 8 February 2026, Sanae Takaichi won a landslide victory in Japan’s snap election. Her LDP-Ishin coalition secured 352 seats in the 465-member Lower House, surpassing the two-thirds supermajority threshold. For the first time in years, Japan has a government with both a clear economic agenda and the parliamentary authority to execute it. For US and European investors who may not follow Japanese politics closely, this matters. The policy framework that Takaichi is building, sometimes called “Sanaenomics,” represents the most explicitly growth-oriented programme Japan has pursued since Abenomics a decade ago. But where Abenomics relied primarily on monetary policy, Takaichi’s approach centres on industrial strategy and direct fiscal spending. The difference has implications for which sectors benefit and how foreign investors should think about exposure. ...

On 30 January 2026, President Trump nominated Kevin Warsh to succeed Jerome Powell as chairman of the Federal Reserve. The Senate confirmation process is underway, and Warsh is expected to take the chair when Powell’s term expires in May. Most Western coverage has focused on what this means for US rates and the dollar. Less discussed is what it might mean for Japanese equities, and why investors looking to diversify beyond an increasingly concentrated US market should be paying attention. ...