The Bank of Japan surprised everyone with a change of its YCC policy yesterday, but it is not necessarily bad news for US Treasuries as it may change the trend in USDJPY. Here is why..
Just one suggestion, if you draw a graph between US2y - JP2y vs. Japanese holdings of US Treasuries, the fit/correlation of the two lines is even better.
Philosophically it seems like there is a bit of difference between growth driven inflation and inflation driven by external factors whilst having no growth (aka stagflation). Doesn’t seem obvious that BoJ will be celebrating to see 2% inflation when there is no growth?
No idea how that changes the investment environment but the response must be different?
Thanks a ton and I learned a lot from your piece.
Just one suggestion, if you draw a graph between US2y - JP2y vs. Japanese holdings of US Treasuries, the fit/correlation of the two lines is even better.
Philosophically it seems like there is a bit of difference between growth driven inflation and inflation driven by external factors whilst having no growth (aka stagflation). Doesn’t seem obvious that BoJ will be celebrating to see 2% inflation when there is no growth?
No idea how that changes the investment environment but the response must be different?