Jason Douglas

So, Sanae Takeuchi, the prime minister, called a snap election.

One of her first policy pledges was to waive consumption tax on food for a couple of years.

On the face of it, maybe not a huge deal, but it turns out this would cost something like $30 billion a year.

And she didn't really explain how she was going to pay for it.

The result of this was that yields of Japanese bonds spiked higher as their prices fell.

Pretty big, chunky moves that spooked a lot of people.

The reason this is important for global markets and what we saw actually after the Japanese yields moved higher was that yields on

Other bonds, including US Treasuries, also moved higher.

One of the reasons Japanese bonds are so important for global markets is that Japanese investors have a hell of a lot of money invested overseas.

And if you see yields spiking higher at home, that might tend to bring some of that money home.

And that has consequences then for all sorts of foreign assets, particularly bonds like US Treasuries, stocks, other things like that.

That's right.

So as you mentioned, the Bank of Japan rated its policy rate to 0.75% today.

That doesn't sound like much, but that is actually the highest it has been in 30 years.

So Japan has had very low rates for really a very long time, right?

So they had a big asset price bubble, everything burst.

And since 1990, rates have been very low.

The Japanese economy was

as everyone will remember, battling deflation for most of that time.

But then, like lots of other economies since the pandemic, we started to see inflation in Japan.