Brown Brothers Harriman’s (BBH) Elias Haddad notes Japan is close to the global ‘danger zone’ in bonds as more JGB issuance is planned to fund additional spending. Prime Minister Sanae Takaichi has called for a supplementary budget to offset higher commodity prices linked to the Iran war. Haddad expects USD/JPY to remain below 160.00 due to the risk of currency intervention.

Supplementary budget and JPY intervention risk

"The ongoing Strait of Hormuz blockade remains the dominant market driver because there is no clear endgame in sight while the buffer from global oil inventories is shrinking fast. As a result, crude oil prices are edging higher, weighing on both global bond and equity markets."

"Japanese Prime Minister Sanae Takaichi has called today on the finance ministry to compile a supplementary budget to cushion the economy from rising commodity prices linked to the Iran war."

"Japan is not far behind, with more JGB issuance in the pipeline to finance additional spending."

"USD/JPY should hold under 160.00 due to threat of currency intervention."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)