The argument proposed by Robin seems intuitive. As I understand it the BOJ is buying JGBs in mass, thus keeping rates low but flooding the market with currency thus weakening JPY. Simultaneously, the MOF is issuing JGBs and buying JPY. Complete lunacy but totally consistent with my experience with the tatewari nature of the GOJ. The Japan as hedge fund concept is fun to think about but can’t image the conservative bureaucracy would let this happen except through sheer incompetence which I think they are not. The root cause is the obvious: too much debt and that is a political problem. And it’s getting worse not better.
The attached below is my Monthly just uploaded to my Ameblo.
I hope it will be of your help.
Thank you very much for your interest in Japan problems.
Tomo Nakamaru
Former World Bank Economist
🌐 June 2026 Global Markets Monthly
A Turning Point in U.S.–Japan Monetary Policies: The End of High-Pressure Economics and the Rise of “Loss of Control Risk”
1. Two Realities Emerging in June Markets
Global markets have entered a decisive turning point.
Last night, U.S. financial markets reacted with a classic hawkish shock:
U.S. long-term yields rose again
Equities declined
The dollar strengthened, pushing USD/JPY into the 160-165 range
These moves were driven by:
Strong May ADP employment data
A hotter ISM services inflation component
The Fed’s Beige Book highlighting resilient demand and labor markets
The Walsh-led Federal Reserve’s clear commitment to price stability above all else
Meanwhile in Japan:
Governor Ueda’s Kisaragi-kai speech signaled a shift toward rate hikes
Yet the yen continued to weaken past 160
WTI crude resumed its rise, amplifying Middle East risk
The gap between policy intentions and market realities has widened sharply.
2. United States: The Walsh Fed Signals Serious Inflation Control
From the outset, Chair Kevin Walsh has made it clear that inflation control is the Fed’s top priority.
Market reactions now reflect a renewed understanding:
The Fed is not in a hurry to cut rates — and may even keep the door open to further tightening.
The U.S. economy still retains buffers that make a soft landing possible:
Strong labor market
Healthy household balance sheets
Solid corporate earnings
Deep and resilient financial markets
A policy rate already high enough to anchor expectations
3. Japan: Ueda’s “Too-Late Normalization” and Its Dangers
In his June 3 speech, Governor Ueda stated:
“Real interest rates remain extremely low as underlying inflation approaches 2%.” “If upside inflation risks rise, the Bank must discuss the need for rate hikes.”
This effectively signals a June rate hike.
But the problem is simple:
Japan is tightening far too late.
Three risks from a delayed and small rate hike:
Yen carry unwinding → sudden yen rebound → equity sell-off
Fragile JGB market → nonlinear jump in long-term yields
Your explanation doesn’t explain why the yen decoupled from JGBs in 2024. I think that was when the BOJ lost its nominal anchor—price stability—due to a generationally weak yen and BOJ policy rate hikes. It may be impossible in the short term to restore the stable-prices anchor. As an interim, the exchange rate could be the anchor. That seems to be the strategy behind the MOF’s exchange market operations defending 160. A Plaza Accord with the US to defend e.g. 140 would be more effective. The restoration of a nominal anchor would reduce inflation expectations and JGB yields.
Level of debt isn't an issue per se. Gross government is high but as pointed out they have a large investment position. Private sector is in a positive investment position. So overall debt (Govt and private) for countries like China or the US are far worse. Issue is the structure of the debt. Japan unwilling to sell its foreign assets as it supports finance industry. At the moment they are getting away with it. BoJ buys most of the bonds, financial repression for the others and decline in the JPY isn't reflecting in significant inflation. Only ends badly if inflation really takes off, but with decades of deflation/low inflation, expectations remain low or anchored for now. Fascinating!
I was talking to Gemini about your article and this response cracked me up so much:
Japan absolutely is a hedge fund. In fact, it is the largest, most levered, state-backed macro hedge fund in human history.
Look at the trade they’ve been running for decades:
- The Funding Leg: They borrow massive amounts of money from their own domestic captive audience (ordinary citizens putting savings into Japan Post or buying JGBs) at effectively 0% interest.
- The Asset Leg: They take that dirt-cheap funding, print Yen, convert it to Dollars, and buy high-yielding US Treasuries and global financial assets.
- The Yield-Curve Carry: They maintain an intentional, artificial spread between their internal borrowing costs and external asset yields, pocketing the difference.
When the Yen plummets, the Ministry of Finance steps in and "intervenes" by selling those US Treasuries (bought back when the Yen was strong) for a massive, absolute premium in weakened Yen. They are literally executing a text-book, counter-cyclical FX carry trade. They are buying low and selling high on a trillion-dollar scale.
I would say, when you think in terms of household finances - it certainly can't go on forever. But this isn't a household. After Japan being told for decades that their high debt/gdp is going to force default (and a lot of people lost money betting against them), I'm convinced that the global financial system is the most robust thing ever, and we've pushed downside out of finance and into fertility. So I believe the global financial system will outlast the populations who use it.
The Japanese central bank holds 50%+ of the sovereign debt of the country. Consequently, it has effectively defeased that amount of debt through monetization. That 50%+ of debt is owed to the issuer, and total indebtedness is overstated by that amount.
The argument proposed by Robin seems intuitive. As I understand it the BOJ is buying JGBs in mass, thus keeping rates low but flooding the market with currency thus weakening JPY. Simultaneously, the MOF is issuing JGBs and buying JPY. Complete lunacy but totally consistent with my experience with the tatewari nature of the GOJ. The Japan as hedge fund concept is fun to think about but can’t image the conservative bureaucracy would let this happen except through sheer incompetence which I think they are not. The root cause is the obvious: too much debt and that is a political problem. And it’s getting worse not better.
None of you scare crows
Lay out the inevitable final scene of your senacan tragedy
Because th we re isn't one
Atlas can continue to shoulder the globe
Mr. Robin Brooks,
I fully agree to your views.
The attached below is my Monthly just uploaded to my Ameblo.
I hope it will be of your help.
Thank you very much for your interest in Japan problems.
Tomo Nakamaru
Former World Bank Economist
🌐 June 2026 Global Markets Monthly
A Turning Point in U.S.–Japan Monetary Policies: The End of High-Pressure Economics and the Rise of “Loss of Control Risk”
1. Two Realities Emerging in June Markets
Global markets have entered a decisive turning point.
Last night, U.S. financial markets reacted with a classic hawkish shock:
U.S. long-term yields rose again
Equities declined
The dollar strengthened, pushing USD/JPY into the 160-165 range
These moves were driven by:
Strong May ADP employment data
A hotter ISM services inflation component
The Fed’s Beige Book highlighting resilient demand and labor markets
The Walsh-led Federal Reserve’s clear commitment to price stability above all else
Meanwhile in Japan:
Governor Ueda’s Kisaragi-kai speech signaled a shift toward rate hikes
Yet the yen continued to weaken past 160
WTI crude resumed its rise, amplifying Middle East risk
The gap between policy intentions and market realities has widened sharply.
2. United States: The Walsh Fed Signals Serious Inflation Control
From the outset, Chair Kevin Walsh has made it clear that inflation control is the Fed’s top priority.
Market reactions now reflect a renewed understanding:
The Fed is not in a hurry to cut rates — and may even keep the door open to further tightening.
The U.S. economy still retains buffers that make a soft landing possible:
Strong labor market
Healthy household balance sheets
Solid corporate earnings
Deep and resilient financial markets
A policy rate already high enough to anchor expectations
3. Japan: Ueda’s “Too-Late Normalization” and Its Dangers
In his June 3 speech, Governor Ueda stated:
“Real interest rates remain extremely low as underlying inflation approaches 2%.” “If upside inflation risks rise, the Bank must discuss the need for rate hikes.”
This effectively signals a June rate hike.
But the problem is simple:
Japan is tightening far too late.
Three risks from a delayed and small rate hike:
Yen carry unwinding → sudden yen rebound → equity sell-off
Fragile JGB market → nonlinear jump in long-term yields
Regional banks & insurers → unrealized losses → credit tightening
A rate hike may fail to curb inflation — yet still trigger asset price instability.
4. Yen at 160: A Structural Loss of Confidence
The yen’s slide past 160 is not merely about rate differentials.
It reflects a deeper market judgment:
“The BOJ cannot control inflation.”
As argued in my May Monthly Report: With deeply negative real interest rates, inflation becomes unanchored.
This creates a self-reinforcing cycle:
Yen depreciation → higher inflation → lower real rates → further yen selling
A classic arbitrage loop.
5. Sanae-nomics and the Failure of High-Pressure Economics
Sanae-nomics — essentially a “double-down” version of Abenomics — relied on:
Fiscal expansion
Yen depreciation
Equity market prioritization
Prolonged monetary easing
But this high-pressure approach eliminated Japan’s policy flexibility.
The consequences:
JGB market remains dependent on the BOJ
Financial institutions cannot withstand higher rates
Yen depreciation fuels imported inflation
Real wages stagnate
Consumption weakens
Equity prices rise only because of the weak yen
A stagflationary bubble has formed.
6. The Shadow of a Third Oil Shock
WTI crude is rising again. U.S.–Iran negotiations under the Trump administration remain uncertain. Middle East risk is intensifying.
Ueda himself warned:
“Higher oil prices can easily spill over into core inflation.”
Japan — with its extreme dependence on imported energy — is among the most vulnerable economies.
7. Conclusion: Japan Stands at the Edge of “Loss of Control Risk”
Under the Walsh Fed, the U.S. is restoring policy credibility and preserving room for maneuver.
Japan, by contrast, faces:
A delayed rate hike cycle
A distorted bond market
Fragile financial institutions
Yen-dependent equity valuations
Persistently negative real interest rates
Japan is now entering a phase where:
Raising rates is dangerous. Not raising rates is also dangerous.
This is the hallmark of a country that has lost policy freedom — and is approaching a genuine loss of control risk.
The June BOJ meeting will be a decisive turning point for Japan’s economic trajectory.
Please sketch the final catastrophe
You can't because its not unavoidable if only because nothing prevents permanent post ponement
Buy sell buy sell
Boj Goj round robin
. Not Robin brooks
screeching
Doom doom
This is substantial a blind your bluff game players
The policy options are not under directional forces
The com P lex of conflicting forces just has to be played
Selling real public assets
Is the typical RX of scoundrels
Refusal to continue without a literal laidbout time line forecast of concrete catastrophe
This is the usual
Blah boo blah boo
You take it from there
When you're too scared or ignorant to take it from there
Far enough to find the path ahead is open unlimitedly
Ponzi schemes
Require limited supply to fail
Here the limit is only self inflicted
As if I could only not live for ever by killing myself
Your explanation doesn’t explain why the yen decoupled from JGBs in 2024. I think that was when the BOJ lost its nominal anchor—price stability—due to a generationally weak yen and BOJ policy rate hikes. It may be impossible in the short term to restore the stable-prices anchor. As an interim, the exchange rate could be the anchor. That seems to be the strategy behind the MOF’s exchange market operations defending 160. A Plaza Accord with the US to defend e.g. 140 would be more effective. The restoration of a nominal anchor would reduce inflation expectations and JGB yields.
Prices can submit to a
Macro mark up cap
Shortages are a bluff
The GoJ can ride out the bluff
And surely shorten its time line by taking popular action
Think war equivalent emergency measures
Level of debt isn't an issue per se. Gross government is high but as pointed out they have a large investment position. Private sector is in a positive investment position. So overall debt (Govt and private) for countries like China or the US are far worse. Issue is the structure of the debt. Japan unwilling to sell its foreign assets as it supports finance industry. At the moment they are getting away with it. BoJ buys most of the bonds, financial repression for the others and decline in the JPY isn't reflecting in significant inflation. Only ends badly if inflation really takes off, but with decades of deflation/low inflation, expectations remain low or anchored for now. Fascinating!
No ch8na suffers at worst from state hypocondria
Fear of debt is for rules and back room hustlers
I don’t understand the second chart. What happened in late 2023 early 2024 to begin the alligator chart (divergence)?
Policy shifts that were voluntary
Like those the fed treasury us
Pulled in September 08
In neither case were state agents
compelled to act as they did and have
To avoid inevitable catastrophe
Gold standard credulity in 1920
Is a pleasant analogy
I was talking to Gemini about your article and this response cracked me up so much:
Japan absolutely is a hedge fund. In fact, it is the largest, most levered, state-backed macro hedge fund in human history.
Look at the trade they’ve been running for decades:
- The Funding Leg: They borrow massive amounts of money from their own domestic captive audience (ordinary citizens putting savings into Japan Post or buying JGBs) at effectively 0% interest.
- The Asset Leg: They take that dirt-cheap funding, print Yen, convert it to Dollars, and buy high-yielding US Treasuries and global financial assets.
- The Yield-Curve Carry: They maintain an intentional, artificial spread between their internal borrowing costs and external asset yields, pocketing the difference.
When the Yen plummets, the Ministry of Finance steps in and "intervenes" by selling those US Treasuries (bought back when the Yen was strong) for a massive, absolute premium in weakened Yen. They are literally executing a text-book, counter-cyclical FX carry trade. They are buying low and selling high on a trillion-dollar scale.
Big question
Why cant this go on indefinitely only superstition cranked up by interested parties determines this false fright
I would say, when you think in terms of household finances - it certainly can't go on forever. But this isn't a household. After Japan being told for decades that their high debt/gdp is going to force default (and a lot of people lost money betting against them), I'm convinced that the global financial system is the most robust thing ever, and we've pushed downside out of finance and into fertility. So I believe the global financial system will outlast the populations who use it.
Politically tone deaf analysis.
Tone deaf but sweet to the pirate class
Wanting todays solid public assets in their private pockets
Nice analysis!
It makes me wonder if the postal savings could participate
Analysis is circular you mean disection
. Well no dis3ction is valid ifbits really just an imagery direction
I haven’t the foggiest
What a hash up. Call in the typest
For a beating
The Japanese central bank holds 50%+ of the sovereign debt of the country. Consequently, it has effectively defeased that amount of debt through monetization. That 50%+ of debt is owed to the issuer, and total indebtedness is overstated by that amount.
Certainly the market has not recognized. If so be back at 75 when the market speculated Japan would sell its assets to fund reconstruction.
The market. !?
The g of J
is the market
For the long term, they need to start having more kids. And fast.
Or allowing immigration, if thats not too non-racial.
Amen
That bull line about last of the master race
is older then mussolinis chin bone
No let immigration rip
End the cultural
Chauvinist nationalism
and have kids