Japanese equities are under attack from every direction after Japan and the US intervened to rescue the yen from a 40-year low. A stronger yen crushes export giants' overseas profits, while surging bond yields raise borrowing costs, the AI trade that drove the Nikkei to records unwinds, and fears grow over Japan's debt pile. The Nikkei has fallen about 16% in a month; the currency rescue may have broken the stock market. x.com 

Japanese equities face an eventual collapse as decades of QE and similar tools, which masked demographic-driven productivity decline, come due through currency and bond collapses, with Japan first because it used them first. Per @puckrin, the yen is at its weakest since 2024 even after a hike to 1%, the highest since 1995, as carry trades into US assets persist despite $73bn of intervention. A faster drop in Japanese government bond values should cap the Nikkei. x.com  x.com 

Japanese equities should surge as a deliberately weakening yen pushes capital out of government bonds into stocks, a view shared with Hugh Hendry, who sees USD/JPY at 200 then 300 and the Nikkei at 160,000. Per Hendry, the Bank of Japan wants the yen to collapse to force money from JGBs into equities after 26 years without real wage growth, and offshore demands for dollar collateral drive yen selling. A yen at 250+ would also make Japan cheaper than China, which it already beats on quality. … Show more

Japanese small caps remain a strong short because TOPIX is removing almost all of them, leaving no passive investor on the other side; M&A is a short seller's only real fear. Quants shorting stocks at 2x EV/EBITDA and 0.3x book are winning. More pain is likely for deep-value holders while they wait for companies to delist at higher prices. x.com  x.com 

The yen is strengthening sharply toward ¥153-154 as the Bank of Japan hikes rates and intervenes, starting to unwind the global carry trade funded by cheap yen. That is not a normal FX move but a systemic margin call on every leveraged position funded in yen, with the BOJ now playing its own game rather than following the Fed. x.com 

Japanese equities are where liquidity has to go because the Bank of Japan cannot tighten without blowing up Japanese government bonds. @Globalflows notes the Nikkei just made an all-time high and frames it as the credit cycle at work. x.com 

The yen remains under pressure, and the Bank of Japan's record interventions look increasingly hard to sustain. Japan's foreign exchange reserves fell by $77 billion after record interventions in May. The BOJ wants demand-driven inflation from rising wages and consumption, but a sliding yen risks supply-side inflation instead, leaving it between a rock and a hard place. x.com  x.com 

Japan's yen interventions only buy time, so the yen is likely to keep weakening until the Bank of Japan actually moves. Reserves only help while rates stay pinned, and each round costs reserves Japan can't replace while buying less time, making intervention a speed bump for the carry trade. Japan did not save USD/JPY 160 but rented time at it; once 162 prints, the intervention narrative dies. x.com  x.com  x.com  x.com 

Japanese and South Korean stocks sit directly on top of the crowded AI trade, which is unwinding as global bond yields head toward multi-decade highs and oil tops $90. That mix of higher inflation and borrowing costs undercuts valuations of the most expensive growth stocks. Japan's Nikkei fell 3.2% and Korea's KOSPI more than 6%, triggering trading curbs, as Samsung, SK hynix, Kioxia and SoftBank fell 8-13%. If oil and yields stay high, Asia may be where the pressure breaks through first. x.com 

The yen keeps weakening despite repeated intervention, with dollar-yen back at 156. The US has no choice but to fund as many rescues of the yen as the BoJ wants, since otherwise Japan would be forced to sell its US Treasuries. The BoJ meets on the 18th, and it is unclear what it can even say. x.com  x.com