Japan Macro Watch

The Japanese government unveiled an ambitious ¥370tn investment plan, but withheld funding details due to market sensitivities. Meanwhile, rising inflation and BoJ rate hikes are causing increased policy friction between the government and central bank.

Key Takeaways

• 1.The government announced a ¥370tn investment plan but provided no clear funding source, signaling caution due to interest-rate risks.
• 2.Friction between the government and the Bank of Japan is rising as rates move higher, with the Cabinet Office favoring growth over further tightening.
• 3.Core CPI is expected to accelerate significantly, reaching 4.0% by February 2027, despite temporary downward adjustments in forecasts due to lower oil prices.

Table of Contents

• Fiscal update: Bold vision, cautious communication
• Government steps up pressure on the BoJ
• Inflation acceleration remains intact with lower oil price
• Next week: BoJ Tankan
• Market update
• This week's charts
• UBS Forecasts
• Valuation Method and Risk Statement
• Required Disclosures

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