Rates Strategy Weekly

This report analyzes Japanese fiscal policy, specifically examining government projections for future JPY10 trillion annual spending, and assesses the risk of energy-driven inflation feeding into underlying inflation via wage growth.

Key Takeaways

• 1.Fiscal expansion concerns regarding JGB issuance are expected to linger, as current government projections assume JPY10 trillion in annual additional spending.
• 2.Energy price increases due to the Iran conflict are unlikely to feed through to underlying inflation without a significant, wage-driven spiral.

Table of Contents

• Fiscal concerns seen lingering for now
• What first oil shock can tell us about impact of energy prices on underlying inflation
• DEVELOPMENTS THIS WEEK AND IMPLICATIONS FOR RATES OUTLOOK
• SHORT-TERM OUTLOOK (ONE WEEK – ONE MONTH)
• MEDIUM-TERM OUTLOOK (SEVERAL MONTHS – ONE YEAR)
• Risk scenarios
• WHAT IS REQUIRED FOR HIGHER ENERGY PRICES TO FEED THROUGH TO UNDERLYING INFLATION GOING FORWARD?
• IS THERE A SIGNIFICANT RISK OF HIGHER ENERGY PRICES FEEDING THROUGH TO UNDERLYING INFLATION?
• HOW DO RATE HIKES AFFECT TRANSMISSION OF ENERGY INFLATION TO UNDERLYING INFLATION?
• Yen rates relative value and investment strategies
• INVESTMENT STRATEGIES

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