By Michael Every of Rabobank
It’s more of the same to start this Tuesday, and less too: and that isn’t good news.
Japanese Q2 GDP came in at 0.4% q-o-q, 1.3% y-o-y at the second read, backing the BOJ hiking rates again on September 18 – but is it really going to be ‘one and done’? The 2-year JGB yield is at 1.84% today, close to a new multi-decade high, and vs. the more usual 0% seen for years, while the 10-year is at 2.91%, off recent highs.
Alongside suspicions of further FX market intervention, USD/JPY swung from 154.37 to 153.21, with market chatter of a test of 152 next: recall it was at 160.35 at the start of the month. That’s quite the volatility shock for some books and for those who thought the Yen Carry trade was going to stay one way even after the recent warning from Bessent. Finance Minister Katayama said she will maintain an orderly currency market: but following whose order(s)?
The US and Canada return from a long weekend to a trade war. Trump is threatening to ban US sales of Bombardier’s Canadian-built jets unless production moves south of the border; Canada is set to impose counter tariffs. Showing the direction of travel, the press announced Canada had resumed defense talks with China after an eight-year hiatus, which as one Korean paper puts it, “reflects [an] effort to diversify partnerships amid strained US relations and defence procurement shifts.” How would that work with NATO and the EU unless the latter is dominated by a Germany run by the pro-Beijing AfD? The symbolism, and stakes, matter far more than that benign action, but as the FT argues, Canada “is fated” to keep trying to strike a better deal with t
