Bearbull Global Investments

THE RISE OF THE YEN THREATENS THE NIKKEI 1/3

28 Aug

THE RISE OF THE YEN THREATENS THE NIKKEI 1/3

Posted by BearBull Group In Macro Research Insights 0 comment

Japan's economic growth slowed to +0.3% quarter-over-quarter (+1.1% annualized) in Q2 2026, down from +0.5% in Q1 and missing consensus expectations of +0.5%. This deceleration signals a loss of recovery momentum, driven primarily by contractions in private domestic demand and business investment. This underperformance underscores the persistent underlying fragility of Japan's post-pandemic macroeconomic expansion.

Key Points

  • Slowing momentum for Q2 GDP
  • Q3: Between domestic recovery and external risks
  • Shift in leading indicators
  • Household confidence stabilizing
  • Inflation caught between buffers and input pressures
  • The BoJ’s dilemma and trade-offs in the face of the currency shock
  • Sharp steepening of the yield curve
  • Conditions finally in place for a yen appreciation
  • Mixed outlook for Japanese stocks
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