In the wake of the BoJ signaling a rate hike at its December meeting, the 10-year JGB yield has approached 2% and we think it will climb to a 30-year high of 2.5% over the next couple of years. We aren’t convinced that higher yields will trigger a fiscal crisis anytime soon nor do we foresee widespread repatriation of overseas capital by Japanese investors. But there is a risk that falling bond prices could result in balance sheet problems at Japanese financial institutions, with pension funds looking most vulnerable.
Will the AI bubble continue to inflate? How will US-China tensions shape trade flows? Will a new Fed chair lead to much lower US rates? We’ll be highlighting what we expect to be the key drivers of macro and markets in the coming year in online Drop-In briefings on Wednesday, 10th December. Register here for our World in 2026 Drop-Ins.
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