Macro Risk Digest: Tokyo Drift

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Macro Risk Digest: Tokyo Drift

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Macro Risk Digest

Tokyo Drift

Key themes for corporates 16 July 2026

1) Japan spillover risk. Developments in Japan have global implications. Higher JGB Rates and Currencies Research

yields and weaker yen are spilling over to broader rates & FX markets, although shared Global

global factors – higher oil prices, inflation and fiscal risk premium – are amplifying

moves. We are close to pain thresholds for policymakers that may elicit a response in Table of Contents

coming months, whether FX intervention, more prudent monetary/fiscal policy mix or

Top of Mind: Japan spillovers 2

incentives to repatriate foreign assets.

Spotlight: second-half revisions 4

Outlook: Risk of global hawkish shift suggests paying fixed rates to hedge future The month that was 5

borrowing costs. Attractive for Japan corporates to hedge long-dated FX exposure via Market monitor 5

options. Macro forecasts 5

2) US resilience persists even with several tailwinds (tax refunds, World Cup, wealth Research Analysts 5

effect) set to fade. While the latest inflation data were soft, this growth resilience

coupled with renewed Middle East tensions, means the inflation battle is far from won. Adarsh Sinha

Key Fed officials, including Warsh and Waller, remain attuned to delivering price stability. FX and Rates Strategist

MLI (UK)

Our economists hold a well out-of-consensus Fed call, still seeing scope for 3 hikes this +44 20 7995 9745

year. adarsh.sinha@bofa.com

Ralph Axel

Outlook: We stay bullish USD over the coming months – tactically hedge non-USD Rates Strategist BofAS

exposure, especially vs. low yielding currencies. ralph.axel@bofa.com

Ronald Man

3) Energy markets on edge again. Strategic inventories and low refinery run rates Rates Strategist MLI (UK)