STAGFLATION RESHUFFLES THE DECKS FOR JAPANESE ASSETS 3/3

The Japanese fixed-income market is under intense pressure, with 10-year JGB yields stabilizing near 2.1% after significant volatility. This calm is fragile, as yields are now deeply correlated with inflationary fears triggered by the Middle East conflict. We anticipate yields will resume an upward trend toward 2% and beyond, as current coupons fail to offset capital erosion in an environment of rising prices and recessionary risks.