Asia: It is all about policy not politics

Taking advantage of a high approval rating, Prime minister Sanae Takaichi has called for a snap general election to take place on 8 February. This led to the yen weakening and JGB rising with long term yields hitting multi years highs.

Following this, the Bank of Japan (BoJ) meeting kept the policy rate unchanged. But after a hawkish press conference, markets saw a move in dollar-yen strengthening. This has led to speculations about a possible although not confirmed intervention from the BoJ and or from the Fed. To note that Asian currencies have been in the past managed by local governments to be weaker compared to the US dollar in order to boost export competitiveness.

Lately, a boost of re-industrialization in the US and the West is taking place. This restructuring could lead over time to a lower populism, rising real wages and higher incomes. It also helps reduce trade deficits, thereby lowering global imbalances. Furthermore, appreciating currencies and equity markets go together allowing Asian equities, including Japan, of  benefiting from improving corporate governance.