The Nikkei is on a roll. Thursday’s 1.6% rise was its best day in two months, it is up 4% this week and on course for its best week since October, and a sixth straight weekly rise would mark its best run in five years.
As Phil Suttle, a former World Bank economist, wrote on Thursday: “Japan is back!”
Inflation in Japan is also back. After decades of fighting against deflation the Bank of Japan is facing the unfamiliar problem of sticky inflation, while at the same time insisting that it will stick with ultra-loose monetary policy. Something has to give.
Annual core CPI is expected to rise back to 3.4% from 3.1% in March, which would up the ante on the BOJ to start dismantling its ‘yield curve control’ policy sooner rather than later.
As the week draws to a close, the broader global market mood is one of optimism and bullishness – optimism that a U.S. debt default will be avoided and bullishness that markets can withstand the rise in bond yields sparked by the latest wave of hawkish Fed-speak.
Wall Street, Treasury yields, implied U.S. interest rates and the dollar all rose on Thursday.
