Banks Power is On: Japan Has a New Central Bank Governor, and Inflation is on the Rise. That is Good for Both the Yen and Bonds.

Apr 14, 2023

Banks Power is On: Japan Has a New Central Bank Governor, and Inflation is on the Rise. That is Good for Both the Yen and Bonds.

The banks power is on. On April 9, Kazuo Ueda was sworn in as Japan’s central bank chief, following Haruhiko Kuroda, who had held the position for ten years. It may be a terrific time for the world’s third-largest economy.

For much of the globe, inflation is a hated scourge that must be battled to death by central banks hiking interest rates. After decades of deflation, it’s more like manna from heaven for Japan’s policymakers. Kuroda was the high priest of this effort, keeping rates at zero and growing quantitative easing while worldwide peers tightened aggressively.

Inflation has finally arrived in Japan, with import-driven price increases exceeding 3% per year. T. Rowe Price’s portfolio manager for Japanese stocks, Archibald Ciganer, argues that this is the first inflation he has witnessed in Japan in 23 years. Reflation would be a night and day difference.

Markets anticipate that Ueda, an academic economist with a Ph.D. from the Massachusetts Institute of Technology, would eventually reverse Kuroda’s ultra-dovish stance. According to Masamichi Adachi, chief Japan economist at UBS, the BOJ is not in a hurry to begin policy normalization for extra banks power.

With the central bank controlling half of Japan’s $8 trillion bond market, a little policy intervention might go a long way. Any tightening should strengthen the yen while reducing liquidity in global markets. Easy money seeping out of Japan, according to Michael Kelly, head of PineBridge Investments’ multiasset strategy, has been one of the reasons why markets worldwide have been able to defy gravity.

While most central banks are happy to alter prime rates, the Bank of Japan additionally enforces “yield-curve control,” which limits the difference between prime and the yields on other duration bonds.

Investors anticipate Ueda tinkering with this system first, boosting the 10-year paper spread from 50 basis points, or a half-percentage point, to 75 or 100. According to Aaron Hurd, senior currency portfolio manager at State Street Global Advisors, the move might occur during the June BOJ board meeting. UBS’ Adachi believes Ueda should wait until the prospect of a US recession becomes clearer.

Both believe that monetary policy changes should make Japanese bonds more appealing, hence boosting the yen for banks power. Adachi’s objective is 120 per dollar, up from 132 now. Hurd agrees that the yen is one of our preferred currencies.

The picture for Japanese stocks is bleaker. Stocks tend to fall as the yen rises, as the index is dominated by mega-exporters such as Toyota Motor (7203. Japan) and Sony Group (6758. Japan).

T. Rowe Price’s Ciganer seeks to counteract this headwind by investing in conglomerates that are rationalizing their holdings, such as Hitachi (6501. Japan), or improving their governance game, such as Seven & I Holdings (3382. Japan), the parent company of the 7-Eleven franchise in the United States. He’s also discovering growing firms in a sector famed for value, such as Daikin Industries (6367. Japan) and electronics behemoth Keyence (6861. Japan).

Ciganer and Kelly are not following Warren Buffett of Berkshire Hathaway (BRK.A, BRK.B), who unveiled this week a multibillion-dollar increase of his assets in five Japanese trading firms, led by Mitsubishi (8058. Japan) and Mitsui (8031. Japan).

According to Ciganer, the assets of this corporation are primarily located outside of Japan and are heavily weighted toward commodities, making it a dangerous gamble as the global economy cools. Their main benefit is inexpensive borrowing in Japan, which may become less cheap in the near future.

“Buffett spotted the era of free money coming to a close,” Kelly says. “He locked some in the last place where it’s still available.”

Subscribe Our Newsletter

Amazon Anthropic AI investment

Hazem

$2.75 Billion Amazon Anthropic Investment That Intensifies The AI Development Rally

The giant tech, Amazon, doubles down on its AI investment with Anthropic, the developer of Chat-GPT competitor. What is the new competitor for ChatGPT?

AI
Bitwise to Acquire OBTC

Otar

Osprey Bitcoin Trust Assets to Be Acquired by Bitwise: What It Means for Investors

Bitwise is acquiring OBTC assets for $120M, integrating them into BITB. Discover the benefits and risks for OBTC unitholders in this update.

Crypto
Get the ultimate solution: B2BinPay Get the ultimate solution: B2BinPay
Sponsored
Constantine

How Do You Measure Liquidity in Forex?
Learn what Forex liquidity is, what factors determine it and what metrics are used to measure it.

discover
Best Decentralized Crypto Exchanges In 2023

Tamta

Best Decentralized Crypto Exchanges In 2023

Today, we have countless opportunities to convert our fiat currency to cryptocurrencies and vice versa, but in the beginning, when these digital assets were still unfamiliar and strange for the masses, purchasing cryptos or exchanging them was not so simple.

Crypto Exchange Business
Contact us bg

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiries

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Successful!
    Thank you for your request.
    We will contact you shortly.
    Close

    Сonstantine

    Internal vs External Range Liquidity In ICT Trading Explained

    Internal vs External Range Liquidity In ICT Trading

    Constantine

    Portfolio Backtesting — Tools, Metrics, and Methods Explained

    Portfolio Backtesting

    Сonstantine

    ICT Trading Explained: Smart Money Concepts, Tools and Setups

    ICT Trading Explained

    Сonstantine

    CFD Trading Strategies: A Practical Guide to Risk and Execution

    CFD Trading Strategies

    Alexander

    What is a Fair Value Gap? A Guide to Trading Market Imbalances

    What is Fair Value Gap

    Vitaliy

    Triangle Patterns in Trading: Mastering Ascending, Descending & Symmetrical Strategies for Maximum Profit

    Triangle Patterns in Trading: Ascending, Descending & Symmetrical Guide

    Alexander

    What Is COTI? Payments, Token & Price Prediction

    What is a COTI coin

    Constantine

    Best Copy Trading Software in 2025

    Best Copy Trading Software in 2025

    Alex

    What Is an AI Agent? The Future of Finance Explained

    AI Agent Explained

    Constantine

    How to Start a Liquidity Provider Business?

    How to Start a Liquidity Provider Business

    Constantine

    How to Start a White Label Brokerage?

    How to start a white label brokerage

    Constantine

    How to Start a Multi-Asset Brokerage?

    How to Start a Multi-Asset Brokerage

    Hazem

    Crypto Ransomware – How They Happen and How to Avoid Them

    Crypto ransomware explained

    Constantine

    Best Web3 Browsers in 2025

    Best Web3 Browsers

    Constantine

    Best DAO Projects in 2025

    Best DAO projects in 2025

    Alexander

    Crypto Nodes That Pay: Your 2025 Guide to Top Passive Income Opportunities in Crypto

    crypto nodes that pay

    Alex

    Pi Network: Scam or Groundbreaking Crypto? The Full Analysis

    Pi Network Explained

    Constantine

    Triple Net Lease: Meaning, Benefits, and Strategies Explained

    Triple Net Lease

    Constantine

    Hanging Man Pattern: How to Identify and Trade It Effectively

    Hanging Man Pattern

    Alex

    5 Infinite Banking Mistakes That Could Cost You Thousands

    Infinite Banking Mistakes to Avoid

    Aleksander

    Solana Firedancer: Solving Solana’s Biggest Problems with a New Engine

    Solana Firedancer explained

    Alexander

    What Is an Interest Coverage Ratio? How to Use This Financial Metric to Evaluate Company Health

    Interest Coverage Ratio Explained

    Hazem

    After-Hours Trading: Can You Trade After Financial Markets Close?

    After-Hours Trading Explained

    Alexander

    How to Scale a Crypto Exchange Business and Stay Competitive

    how to scale crypto exchange business
    liquidity-provider-logo
    • News
      • Stock Market Forecast
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
      • AI
      • Technology
      • DeFi
      • NFT
    • Articles
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
      • Blockchain
      • Investing
      • NFT
      • DeFi
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
      • White Label Brokerage Platforms
      • Broker CRM Platforms
    [email protected]

    © 2024 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy
    This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.