Lincoln got the Oscar nods but Japan PM Abe is winning at the box office.
The united domestic front to lower the Yen accelerated as the 10T yen stimulus program was unveiled last night. The yield curve at certain points has steepened to levels not seen in several years. The 81bp benchmark 10 year JGB should become a hot topic. The inflation target is moving to 2 and growth should go from -3 to slightly over 1.
The current account, trade deficit flow should see Japan return to the buy side of the US Treasury market in the months to come. Wisely, they have opened the door to playing in Europe. ( tag @groditi on Twitter for a deeper factor analysis) Our feeling is, not unlike other virtuous cycles, Japan's return to the T market will add distributional support to a declining market. The abrupt shift in direction last night was a sign we had been looking for.
These policies have surely caught the attention of Japan's hulking neighbor. Also a near net zero as QE has rolled on, China's factor account flows will need monitoring. Currency moves often coincide with rising nationalism and testy relations. We expect to hear more about small exotic islands soon.