Finance Minister Katayama’s announcement that the government will encourage pension funds, including the GPIF, to invest more in Japanese financial assets has helped unwind the spike in bond yields from earlier this week. However, the move is far from a panacea, as it does little to address investor concerns about the Takaichi administration’s interventionist tendencies. Elsewhere, there are growing signs that China’s export curbs on rare earths and other critical minerals are starting to bite. Those supply disruptions are not yet causing major production cuts, but they add to inflation risks and reinforce our above-consensus view that the BoJ will raise rates to 2% by end-2027.
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