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A Quick Look At Breakevens

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Japanese 10-Year breakevens trade just shy of the multi-year highs, after moving to the highest level observed since ’15 in recent sessions. Japan’s status as a notable net energy importer is a major factor in this dynamic, given surging global energy prices on the back of the Russia-Ukraine conflict. Citi’s Japan terms of trade index hit the lowest level on record (dating back to ’11) in recent days, although it has bounced relatively sharply, with crude prices back from their recent cycle highs. On the currency side of the coin, USD/JPY has hit a fresh multi-year high this morning, which will increase the cost of $-denominated energy products for Japan (although the wider JPY is off of its multi-year TWI trough lodged back in February). Note that 10-Year breakevens remain well shy of the BoJ’s 2% inflation target (last ~0.82%), with the Bank’s pledge to persist with its monetary easing likely aiding the current breakeven dynamic, at least at the margins.


Fig. 1: Japanese 10-Year Breakevens (%)

Source: MNI - Market News/Bloomberg

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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