Carlyle Group LP asserts that the combination of rising Japanese government bond yields and a weakening yen signals a positive turn for Japan's economy as it emerges from decades of deflation, despite some critics holding opposing views.
In their annual outlook released on Tuesday, Jason Thomas, Carlyle's Global Head of Research and Investment Strategy, and his team noted that Japanese policymakers have been gradually raising interest rates while effectively suppressing the yen's value; a more competitive exchange rate will boost domestic corporate profits.
Thomas stated, "For an economy finally breaking free from deflationary stagnation, interest rate normalization is nothing to worry about. We must not misinterpret the market signals."
The persistent depreciation of the yen, coupled with Japanese government bond yields climbing to their highest level in a generation, has caused concern among some observers.
This combination continued on Tuesday: as markets speculated that Prime Minister Sanae Takaichi might call a snap election soon, Japanese stocks surged to a record high, the yen plummeted, and government bond yields rose.
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