Matsuzawa Morning Report: Macro Strategy - Japan

Research evidence excerpt

Matsuzawa Morning Report: Macro Strategy - Japan

Global Markets Research

18 June 2026Matsuzawa Morning Report

Macro Strategy - Japan

Research Analysts

Shift to rate hike stance at FOMC Strategy

Naka Matsuzawa - NSC

Market's expectations shaped differently compared to typical rate hike naka.matsuzawa@nomura.com

phase +81 3 6703 3864

-TheFOMChasshiftedtoprojectingaratehikein2026,whileexpectingratecutsagain

from2027;itisunusualtoanticipatemultiplepolicyreversals.

-Marketpricingisalsounusual:itassumesthattheFedwillstopraisingratesaftertwo

instances,perhapsviewingthemasratehikesservingasinsuranceagainsthighercrude

oilprices.

-WhilethereisagoodchancethattheFedwillnotcarryoutaninsurance-likeratehike,

themarketwouldlikelypriceinaseriesofregularratehikesifemploymentandwages

weretoaccelerate.

-Weexpect10yrUSTyieldstoremainaroundcurrentlevelsuntilaseriesofratehikesis

pricedin,andthensurpass5.00%.

Today's Japanese market

In Japanese markets on Thursday, this author expects bonds to fall back and equities to

show limited upside (in overnight futures trading, bonds and equities were down 30 sen

and JPY70, respectively, over OSE). In overseas markets yesterday, US bonds

plummeted in response to the FOMC's hawkish surprise. Other markets were risk-off

overall, but there were no signs of panic. The rise in market volatility was limited, and

CBOE VIX was in the 18-19 range. In the US bond market, near-term rate hike

expectations rose sharply and the market priced in two rate hikes over the next six months

(Figure 1). At the same time, forecasts for the next year and beyond did not change much,

and the drop in long-term bonds was relatively modest since inflation expectations also

fell. In the US stock market, cyclicals such as bank and capital goods stocks rose, and the