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Daiwa's View - French crisis: Implications for government bonds in Japan and Europe
28 August 2025
884 KB
PDF
Spreads on French government bonds widened after French Prime Minister Bayrou, who is leading fiscal consolidation, decided to call for confidence vote on 8 Sep
While vigilance regarding key events will be needed in the near term, if leeway for ECB’s rate cuts were to increase due to substantial tightening of FCI in Europe, that could provide good opportunity for investment in hedged foreign bonds
Meanwhile, USD-denominated asset swap spreads on superlong JGBs have tightened, suggesting no clear evidence of contagion from the French crisis
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Daiwa's Economic View - What rising food prices suggest about future rate hike decisions
28 August 2025
537 KB
PDF
The stickiness of food price increases is a crucial factor considered in rate hike decisions
While sharp rises in food prices are primarily driven by supply factors, there is a risk of prolonged supply shocks
Longer-term food price increases brought by climate change are another risk to consider
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Daiwa's View - How far is the BOJ behind the curve?
22 August 2025
832 KB
PDF
Estimates based on the Taylor Rule suggest an appropriate policy interest rate range of 0.87% to 1.35%, indicating that the current 0.5% is far too low
If interest rate hikes are delayed further, the ultimate terminal rate is highly likely to exceed 1%, minimum level assumed by BOJ
If policy rate rises to 1.25%, the long-term yield is projected to reach the 2.1% range, implying that the current 1.6% is merely an interim level
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Daiwa's Economic View - Upside risks to Japanese economy: Effects of fiscal package could mitigate downward impact from tariffs
19 August 2025
517 KB
PDF
Our estimates of economic effects of cuts to gasoline tax, diesel fuel tax, and consumption tax, and stimulus payments
Fiscal programs currently under discussion could be large enough to substantially mitigate downward impact from tariffs
Attention should be paid to both downside risks from tariffs and upside risks from fiscal policies at home and abroad
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Daiwa's Economic View - Apr-Jun GDP: Economy still resilient despite lingering uncertainties
15 August 2025
516 KB
PDF
Japan's economy showed no impact from Trump's tariffs in Apr-Jun 2025, but be aware some may emerge from Jul-Sep 2025
We forecast real GDP growth of +0.0% q/q (+0.2% annualized) for Jul-Sep 2025
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Daiwa's Economic View - Cabinet’s budget formulation authority threatened by opposition parties’ bill to cut gasoline tax
15 August 2025
387 KB
PDF
Opposition parties’ bill to cut gasoline tax is likely to pass as ruling parties lack a majority in both upper and lower houses
If passed, the tax cuts would preempt the budget formulation authority inherently held by cabinet, undermining the foundation of parliamentary cabinet system
This would result in fiscal expansion without clear accountability, adding a new risk factor to the JGB market
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Daiwa's Economic View - BOJ July MPM Summary of Opinions: Step closer to rate hike within 2025
8 August 2025
533 KB
PDF
BOJ's July Summary of Opinions strikes hawkish tone
Many opinions on economic activity and prices optimistic, cite upside risks
More opinions on monetary policy conduct advocate early rate hikes
Hawkish Summary of Opinions vs. dovish Governor's press conference
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Daiwa's View - Discussions within BOJ on tariffs, trade policy: At stage for mulling resumption of rate hike
6 August 2025
394 KB
PDF
Economic slowdown pressure due to tariffs may not be as strong as feared at April's meeting
Many firms plan to continue raising wages despite US tariff policies
Expect to realize outlook in which trade issues progress “without escalation”
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