Japan [日本], Meta Intelligence

Japan-Watching: Yen Repatriation Starts with the Whale

GPIF, one of the largest national pension funds in the world, is likely to rebalance its assets from non-yen bonds to yen bonds, signaling a big turn in Japan’s cross-border capital flows.

[from Japan Macro Advisors, 10 September, 2026]

Key takeaways

In 2013, GPIF’s investment committee, chaired by UEDA Kazuo [植田和男], now the BoJ governor, saw a fair chance of a JGB crash within five to ten years. Its CEO priced the crash as the 10-year rising from 0.5% to 3%. Subsequently, GPIF cut its target weight for domestic bonds from 60% to 25% as an emergency measure against abnormally low yields.
The 10-year is now at 3%. On my replication of GPIF’s own allocation rule, a real return on JGBs near zero points to a 50% weight in domestic bonds, against 25% today. I expect GPIF to raise the weight, if it has not already started in the September quarter.
How GPIF decides its asset allocation and communicates it publicly is a very delicate and political issue. But regardless of how it communicates it, a change in asset allocation is inevitable. In my view, it signifies a big turn in Japan’s cross-border capital flows.

Japan has one of the Largest Pension Funds in the World

Japan has the second largest public pension fund in the world. Norway’s is the biggest, although it is not strictly a pension fund. Canada’s pension funds, when all eight of its variants are added together, come a close third.

Japan set up its first national pension fund in 1961 and it has since gone through various reforms and reorganization over the last 65 years. Its current form is called the Government Pension Investment Fund (GPIF). As explained in a later section, GPIF has a few siblings, and when we add them together, Japan’s public pension funds can be said to be the largest in the world.

Chart 1

GPIF used to invest most of its asset into JGBs

GPIF used to invest the majority of its fund as loans to the national government and into Japanese government bonds (JGBs). At the end of FY2012, 62% of its assets consisted of domestic bonds. However, in 2014 it went through a radical asset reallocation and the target weight for domestic bonds was reduced from 60% to 35%, and then further down to 25% in 2020. Its current target allocation is a clean four-way 25% split into domestic bonds, domestic equity, foreign equity and foreign bonds.

As one of the largest pension funds in the world, its asset allocations attract market attention and there is speculation that it is about to raise its allocation into domestic bonds. In my view, there is indeed a very high chance that GPIF will be raising its allocation into domestic bonds, if it has not already started to do so in the current quarter ending in September 2026.

Chart 2

UEDA in 2013 Saw a Bond Crash Coming

To understand why GPIF is highly likely to raise its allocation into domestic bonds, we need to go back in history to 2013. Why 2013? Of course, it is the year the Bank of Japan (BoJ) started its massive quantitative easing. The 10-year JGB yield started 2013 at 0.8% and it fell to 0.3% by the end of 2015 before briefly hitting a negative rate of -0.3% in 2016. If you were the chairperson of the GPIF investment committee, you would have been concerned about the wisdom of continuing to invest in JGBs at such a policy-driven low rate. The actual chairperson was UEDA Kazuo [植田和男], the current BoJ governor. In the minutes for October 2013, UEDA said, “I think there is a fair chance that bonds will crash at some point in the next five to ten years [unofficial translation].”

The minutes were released only seven years later; otherwise the use of the word “crash” would have been controversial.

GPIF CEO Priced the Crash at 3% in 2014. We Are There Now

If you read through the GPIF minutes between 2013 and 2014, you would see that GPIF officials were increasingly conscious of the precariousness of investing in JGBs. Long story short, as this process was highly political and a sensitive subject, they decided to radically lower the target allocation weight for JGBs to 35% in 2014, presented it as the result of a philosophical change in the way GPIF is managed and how the concept of “risk” should be considered. Investment in JGBs was no longer considered low risk in real terms. The asset allocation for domestic bonds was further lowered to 25% in 2020. The following is what MITANI Takahiro [三谷隆博], the GPIF CEO at the time and an ex-BoJ senior official, said in the October 2014 GPIF minutes.

“Yields are just under 0.5% now, so a move to near 3% would mean a loss of about ¥25 trillion. (…). So I think the clearest way to explain it is that reducing the weight on JGBs to some degree is simply unavoidable [unofficial translation]”

The 2014 cut in the weight was partly an emergency escape

As I wrote earlier, the radical asset reallocation in 2014 was part a shift in the concept of risk from “nominal” to “real”, so that JGB is no longer risk free assets. But the change was also at least partly an emergency measure to escape the abnormally low-yield environment. Then the next natural question is, now that the JGB yields are no longer abnormally low, what should happen to its asset allocation? Pensions are paid in yen, so long-duration Japanese government bonds are a natural match, while GPIF should also be holding some non-yen assets and equities to diversify its assets and protect the overall balance sheet from inflation. In the next section, I will show you a simplified replication of how GPIF decides its asset allocation and what GPIF’s asset allocation could be now that JGB yields are normal.

How GPIF decides its weights

Put simply, GPIF’s target weights are the output of an optimizer with a few rules. Find the portfolio that, at the required real return, has the smallest average shortfall below wage growth in the years when it falls short, and round it to the nearest 5%.

When GPIF last decided to keep the current 25% weight for domestic bonds in 2025, JGBs were assumed to produce a nominal return of 0.5% against wage growth of 1.3%, so a real return of minus 0.8%. Exhibit 1 shows a simplified matrix of weights depending on expected nominal return on bonds and wage growth. The red box shows the assumption behind the 2025 weights decision mentioned above. If we use a higher wage growth assumption of 2.3%, an expected nominal return of 1.8% on bonds gives a weight of 35%. GPIF’s bond portfolio has an average maturity around 10 years, and the 10-year bond is yielding 3% now. A lot of thought and estimation is needed to form a view on the expected real return on domestic bonds, but in my view, it is clear that the minus 0.8% used in their last review is too low given where bond yields are.

Why GPIF kept the weight in 2025 and why circumstances changed

In late 2024 when the GPIF was reviewing the weight as part of its five-year plan, the BoJ was already in the process of exiting from QE and raising its policy rate. However, the JGB market was still in the process of adjustment and bond yields had a lot of room to rise. For example, the 10-year yield was 0.89% at the end of September 2024, rose to 2% by the end of 2025 and now, in September 2026, stands at 3%. You can understand why GPIF decided to keep its weight on domestic bonds unchanged as it would have incurred capital losses on bond purchases in 2025. But in my view, as I wrote in the report “The Long Climb in JGB Yields Is Nearly Over” [archived PDF], long bond yields are getting closer to a stability point. If the GPIF board shares my view, it is a good time to think about raising its target weight into domestic yen bonds.

The Whale Problem and the Washington Problem

How high should the new weight be for domestic bonds? The reality of determining appropriate weights and how to announce it is a lot harder than the simplified model I explained above. Other than forming a reasonable view on the expected real return on asset classes, there are a few factors that complicate the process.

Firstly, GPIF needs to think about how such an announcement would affect the market. GPIF is what financial market professionals call a whale, a massive investor whose investment decisions sway market prices. There is also a related argument that given the dominance of GPIF in the domestic market, GPIF should be increasing its asset weight abroad to reduce its impact on domestic asset markets.

Secondly, changing asset allocation weights carries political considerations. If GPIF decides to raise the target weight for domestic bonds, foreign bonds are the likely asset class whose weight will go down. More than 50% of its foreign bonds are in US dollars. With all the news circulating in the market now, Scott Bessent will not like a public announcement that one of the largest pension funds in the world is reducing its purchase of US treasuries. There are domestic political considerations as well, as the Takaichi government contemplates how best to fund its deficits.

These are the issues GPIF officials must be debating. How GPIF decides its asset allocation in the near future will be a revealing case study for those who want to study how policy-making works in Japan. Those who are interested in this topic should read the transcripts of an interesting government committee in 2014 that focused on how GPIF could shield itself from political meddling. Guess who chaired the committee? UEDA Kazuo [植田和男].

Whatever the near-term decision GPIF makes regarding its target weight, I think it is fairly clear that GPIF should be increasing its investment into domestic bonds. The following table shows how much GPIF could buy in net terms, depending on the eventual rise in the target weight.

How much GPIF buys: ¥32tn at 35%, ¥80tn at 50%

Domestic Bond Target	GPIF Buys	With the Sister Funds
30%	¥16tn	¥20tn
35%	¥32tn	¥20tn
40%	¥48tn	¥20tn
50%	¥80tn	¥20tn

Additional domestic-bond holdings from re-weighting the fund at 30 June 2026 (managed assets ·317.8tn). Foreign bonds sold first.
Source: GPIF, JMA.

Three things in this table matter for the market. GPIF is allowed to deviate its asset allocation by six points either side of 25% without any announcement, so 39% target is already possible without any public announcement. In 2014 GPIF moved inside its band first and announced the new portfolio afterwards, and I would expect the same sequence this time. Second, these are static figures, which do not account for the growth of the fund over time.

The sister funds move with the whale

As mentioned earlier, GPIF has a few siblings. The Pension Fund Association for Local Government Officials (¥35.5tn), the Federation of National Public Service Personnel Mutual Aid Associations, known as KKR (¥11.5tn), and the Promotion and Mutual Aid Corporation for Private Schools of Japan (¥4.9tn) manage the pension reserves of local government employees, national government employees and private-school teachers. These sisters run their funds on the same 25/25/25/25 model, and with the legacy reserves they also run, they hold a further ¥87tn on top of GPIF’s.

Conclusion

GPIF cut its domestic bond weight from 60% to 35% in 2014, and later to 25%, to safeguard its assets from the manipulated low JGB yields at the time and the eventual crash they foresaw. That crash, as GPIF’s CEO MITANI defined it in 2014, has now happened with the 10-year yield rising to 3%. In my view, JGB yields have largely normalized and there is no emergency reason to avoid domestic bonds. It is only natural that GPIF would raise its allocation into domestic bonds, although how GPIF communicates this publicly is a touchy issue they need to figure out. When GPIF raises its domestic bond allocation, foreign bonds are the likely asset class to take the hit. GPIF publishes quarterly results and the next publication for the end-September 2026 quarter, expected in early November 2026, will be closely watched. Judging from market movements in the last few weeks, the market has started to sense that what I described in this article is already happening and Japanese money is starting to come back to the yen. While it should be characterized as rebalancing, rather than a repatriation, it seems we are observing a big turn in Japanese cross-border capital flows.

Japan’s Deadliest Delicacy Is Getting More Dangerous

Rising sea temperatures are pushing pufferfish species together, spawning hybrids that even specialist chefs cannot safely prepare

[from South China Morning Post]

by Julian Ryall

Japan’s most dangerous delicacy is getting harder to prepare safely as warming seas push different pufferfish species into the same waters, where they are inbreeding to produce hybrids whose lethal toxins are not yet fully understood.

Fugu – the collective Japanese name for several species of edible pufferfish – is prized as much for the danger surrounding its preparation as for its subtle flavour.

Many species contain tetrodotoxin, a powerful neurotoxin with no known antidote that can cause paralysis, respiratory failure and death.

Since 1958, anyone wishing to prepare pufferfish for public consumption has had to obtain a licence first, a process that takes at least two years and defeats roughly two-thirds of those who attempt it.

A restaurateur shows off a “fugu”, or pufferfish, at a restaurant in Shimonoseki, Japan. Photo: AP

Chefs learn to strip out the fish’s liver, ovaries, eyes and skin – tissues where the poison concentrates – with the precision of a brain surgeon and the nerve of a bomb-disposal technician.

But that hard-won expertise is now being undermined by climate-induced interbreeding, as experts say Japan’s coastal waters are heating up at roughly twice the global average rate.

Spotted pufferfish, once largely confined to the Sea of Japan, have spent the past decade steadily pushing northward in search of cooler currents. Some slipped through the Tsugaru Strait – the channel separating Honshu from far northern Hokkaido – where they have met and mated with the region’s native pufferfish species.

The resulting hybrids now make up as much as 40 per cent of local catches, according to a recent study of fish caught off Fukushima and Ibaraki prefectures.

“We started seeing these spotted fugu on the Pacific coast in 2012 as temperatures in the Sea of Japan became too high for them,” said Professor Hiroshi Takahashi of the National Fisheries University in Shimonoseki, Yamaguchi prefecture.

Temperatures in the waters there were “among the fastest rising anywhere in the world”, he told This Week in Asia, adding that the changes in pufferfish had been happening just as fast.

Customers visit a seafood market in Japan’s Fukushima prefecture. Photo: AP

Some spotted pufferfish had ventured down the east coast as far south as Tokyo Bay, Takahashi said, only to be driven north again as those waters also warmed.

Tiger pufferfish had likewise moved north from their usual range to interbreed with common pufferfish in and around Tokyo Bay, he added.

The trouble is not that hybrids are more toxic than their ancestors, it is that nobody yet knows how interbreeding has affected the distribution of toxins.

Each species of pufferfish stores tetrodotoxin in a different combination of organs and Japan’s health ministry has not yet been able to establish which parts of the new hybrids are safe to eat and which are not.

Until it does, the government has banned the sale or consumption of hybrid fugu – but this ban is almost impossible to enforce.

“They are very hard to identify,” said Takahashi, whose team has developed a DNA test capable of distinguishing hybrid fish and hopes to make the technology commercially available to fishermen who currently have no reliable way of screening their catch.

Pufferfish, or “fugu”, sashimi prepared for eating at a restaurant in Japan. Photo: Shutterstock

Fatal attraction

None of this is likely to diminish fugu’s deadly mystique. The dish has been eaten in Japan for centuries, enjoyed despite – or because of – the risks involved.

Every year, new tales emerge of amateur anglers preparing the fish to eat against the advice of anxious relatives and not surviving the attempt.

Diners speak of a faint numbness in the lips as evidence of a narrow escape and the emperor of Japan is barred from eating fugu altogether, lest even a licensed chef makes a mistake.

Urban legend holds that chefs who do poison a customer are honour-bound to end their own life, with their own knife, in atonement – though this is a myth.

For their part, Japanese restaurateurs are, perhaps unsurprisingly, keen to play down the risks.

A spokeswoman for Miyawaki Fugu Club, an upscale restaurant in Tokyo’s Ginza district, said its chef works exclusively with farmed tiger pufferfish from a long-established supplier, which she insisted were “completely safe”.

James Reimer, a professor of marine biology at the University of the Ryukyus, said the fugu phenomenon fit a wider pattern of marine life relocating in response to global warming.

“What happens to marine ecosystems is one of the hot-button issues of the day, particularly in Japan, because the waters here are warming at twice the global average rate,” he said.

During fieldwork off the Izu peninsula, south of Tokyo, three years ago, local fishermen told him that they had lost virtually their entire kelp crop and that the abalone once abundant in those waters had vanished.

A sea turtles in waters off Japan’s Amami Islands. Turtles are increasingly venturing farther north, fishermen say. Photo: Shutterstock

In their place, they said they were seeing far more sea turtles, as well as large schools of brightly coloured fusiliers – the prefectural fish of Okinawa, some 1,400km (870 miles) to the south.

“Last year, our summer in Okinawa was 30 days longer than average, and we had 120 days when the water temperature was around 30 degrees Celsius (86 degrees Fahrenheit),” Reimer said.

He warns that the picture is not simply one of fish and other marine life swimming steadily north in search of more comfortable temperatures, however.

Global warming is also destabilising weather patterns, making them less predictable. Waters off Kyushu, the southernmost of Japan’s main islands, that might otherwise suit certain species are increasingly prone to temperature swings that could make them unsuitable after all.

Even so, the broader direction is unmistakable. Kyushu’s waters have seen a marked rise in shark sightings in recent years, including large tiger sharks – one more sign of the changes occurring beneath the surface of Japan’s seas.

Japan-Watching: Still Dreaming: Kon Satoshi’s “Paprika” and Other Visions

by Miyamoto Yūko [宮本裕子]

Anime (アニメ) director KON Satoshi (今敏) died in 2010 at the age of 46, but his works remain highly influential. His final film Paprika, released 20 years ago, highlights his preoccupations with the divided self and the blurring of the lines between dreams and reality.

Dream Analysis

After starting out as a manga artist in 1985, KON Satoshi [今敏] honed his skills in the anime production teams of OSHII Mamoru [押井守] and ŌTOMO Katsuhiro [大友克洋], and then made his feature-length direction debut with Perfect Blue, which was released in Japan in 1998. His fourth feature, the 2006 Paprika, is an adaptation of the novel of the same name by TSUTSUI Yasutaka [筒井康隆]. Kon was public in his admiration of the book and he is said to have aimed to produce “something like the novel Paprika” in his previous anime. Indeed, Kon’s Paprika adaptation has many factors in common with his earlier works.

KON Satoshi [今敏] in Venice in September 2006, when Paprika was showing in competition at the Venice International Film Festival. (© Reuters)

Tsutsui studied psychology at university, and motifs and ideas from Freudian and Jungian psychoanalysis feature regularly in his novels. Dream analysis plays a central role in the story in Paprika. In psychoanalysis, psychologically repressed material is thought to be banished to the unconscious before emerging in a different form in dreams. Analysis of dreams has been seen as a valuable way of resolving psychological problems by bringing the repressed matter into the open.

Paprika is set in a near-future Japan, where it is possible to monitor other people’s dreams on a screen. The main character is a therapist called Chiba Atsuko, who provides treatment via her alter ego Paprika, a dream detective. The technology is abused, however, forcing people to experience nightmares, and eventually these flood into the real world.

While Kon follows the broad outline of the original work, his adaptation incorporates numerous changes. The biggest of these is the chaotic parade of electronic goods, beckoning cats (“maneki-neko” [招き猫]), Buddhist statues, torii gates [鳥居], and other marching objects. This symbolizes nightmares spilling out of control, but there is nothing like it in Tsutsui’s book. Kon explained that the parade is made up of old-fashioned appliances and forgotten religious and traditional elements.

In Freud’s The Uncanny, he describes the titular subject as something familiar that has been estranged through repression. In the film, the members of the parade have become estranged from the conscious minds of people today, but are resurrected, and symbolize the uncanny nature of nightmares.

Integrating the Self

Alongside its Freudian elements, Kon’s Paprika shows Jungian influences. Carl Jung did not think that it was best to bring repressed aspects of the psyche under control, instead emphasizing the importance of integrating them into the self. This integration process can be seen in several of the characters.

While Konakawa, a character suffering from anxiety issues, searches through his dreams together with Paprika, he realizes that a mysterious person he repeatedly encounters is an old friend with whom he once shared the ambition of becoming a film director. This friend, who died of illness, appears in Konakawa’s dreams as his other self—the one who wanted to be a director. Konakawa overcomes his anxiety by recognizing and reconciliating with the repressed and forgotten self, represented by his old friend.

The division and antagonism between Chiba Atsuko and her alter ego Paprika are similar to those seen between Konakawa and his old friend. In the original book, Paprika was Chiba in disguise as a dream detective, but in Kon’s anime, they are like entirely different characters. In the finale, when dreams are flooding into the real world, they divide completely, existing at the same time in the same space. After this split, Chiba comes together again temporarily with the uninhibited Paprika when she no longer holds back her suppressed love for her colleague Tokita Kōsaku.

Chiba and Paprika do not divide in Tsutsui’s novel, and Konakawa’s old friend does not represent another self. This aspect of the divided self, added by Kon during the adaptation process, can be taken as a Jungian motif.

Books by the late KAWAI Hayao [河合隼雄], renowned as a Jungian psychologist, were widely read in Japan from the 1980s until the 1990s, and Kon was among his readers. He is said to have become an avid reader of the psychologist for a time because he wanted to understand the music and lyrics of HIRASAWA Susumu (平沢進), the former vocalist of the techno-pop band P-Model, who was influenced by Kawai. Hirasawa later created soundtracks for anime by Kon, including Paprika.

Kon also stated that he was influenced by the novels of MURAKAMI Haruki (村上春樹), who himself developed a friendly relationship with Kawai through interviews and other encounters. Kon is said to have claimed that he was the only person who could adapt A Wild Sheep Chase [羊をめぐる冒険] and The Wind-Up Bird Chronicle [ねじまき鳥クロニクル] to anime.

Kon’s Themes

The anime Paprika could be seen as a later stage in the Kawai-led Jungian psychology boom in Japan, as well as a culmination of Kon’s characteristic themes. For example, the following aspects regularly appear in Kon’s work.

First, there is the depiction of another self. These include Chiba and Paprika in Paprika, Chiyoko and the old woman who appears at key moments and symbolizes Chiyoko’s future self in Millennium Actress (2002), and idol-turned-actress Mima and the apparition of her former pop star self in Perfect Blue.

Second, there are departures from heterosexual norms. In Paprika, the title character announces the wedding of Tokita and Chiba, which maintains the existence of this free-spirited “dream detective,” so that the film deviates subtly from the typical closed ending of heterosexual marriage. The ending of Millennium Actress suggests that Chiyoko’s long search for an artist she meets in her youth is her goal in itself, rather than a romantic relationship with him. In Tokyo Godfathers [東京ゴッドファーザーズ] (2003), alongside a caricatured depiction of a transgender character, we see the struggles of heterosexual couples and their families.

The third aspect is how media and technology blur the lines between reality and the unreal world. In Paprika, the DC Mini device erodes the boundary between reality and the dreams it is used to view, while Mima’s double in Perfect Blue appears in mirrors, PC monitors, and internet browsers. In Millennium Actress, Chiyoko’s acting roles are intertwined with her real life. In Kon’s anime series Paranoia Agent [妄想代理人] (2004), rumors transform into reality through the actions of the mass media and the characters, who in themselves are a kind of media commodity.

During a scene in Paprika when Konakawa goes to the movie theater, posters for Kon’s other films are on display. This shot shows Millennium Actress and Perfect Blue. (© 2006 Madhouse/Sony Pictures Entertainment Japan, Inc.)

Robot Adventure?

While there are clearly repeating themes in Kon’s works, Dreaming Machine [夢みる機械], which remains unfinished due to his sudden death from cancer, shows signs of an apparent major change of course. At one point it was announced that another director would complete the movie, but the producer later backtracked, saying that there was no director capable of realizing Kon’s vision.

Based on the remaining materials, this appeared set to be an action-adventure story about robots hunting down precious electricity in a near-future setting when humans are extinct. Paprika was also set in the near future, but Dreaming Machine features more overtly futuristic urban landscapes. The main characters are smaller, cartoonish robots, compared with the relatively tall humans of Kon’s other films. While it seems to have been aiming for a different kind of movie in terms of both content and visuals, was this really going to be a standard adventure story, without any twists?

Kon said that one of his influences was the manga [漫画] creator MOROHOSHI Daijirō (諸星大二郎). In a short 1974 work by Morohoshi, also called “Dreaming Machine” (“Yume miru kikai [夢みる機械]”), robots go about their daily lives in the place of humans, who dream in a form of suspended animation. Kon’s unpublished 1984 manga Toriko covered similar ground. Can it be simple coincidence that his unfinished work has the same title as Morohoshi’s manga?

Beyond what looks on the surface like a robot action adventure, in Dreaming Machine, Kon may have planned to depict a world of cryofrozen, dreaming humans. Or perhaps the robots were intended to be controlled consciously or subconsciously by humans. This is pure speculation, but I cannot help thinking that Kon may have intended to continue his theme of technology blurring the boundaries between dreams, or fantasy, and reality.

Some people may consider it unproductive to imagine what Kon’s works may have been, but this imaginative act helps carry his vision forward. Kon’s direct and indirect influence can be found in films like Darren Aronofsky’s Requiem for a Dream (2000) and Black Swan (2010), Christopher Nolan’s Inception (2010), and Edgar Wright’s Last Night in Soho (2021). While we will never see another KON Satoshi (今敏) film, his vision lives on.

Economics-Watching: Bank of Japan Updates (June 25th)

[from the Bank of Japan (日本銀行), June 25, 2026]

Economic Activity, Prices, and Monetary Policy in Japan

Speech at a Meeting with Local Leaders in Hyogo

TAMURA Naoki [田村直樹], Member of the Policy Board, June 25, 2026

Read the full translated speech [Archived PDF]

Flow of Funds Accounts (Retroactive Revision and 1st Quarter 2026, Preliminary Figures)

The Bank released the following data today.

Flow of Funds Accounts (1st Quarter 2026, Preliminary Figures) [Archived PDF]
Basic Figures of the Flow of Funds (1st Quarter 2026) [Archived PDF]

The Overview of Japan, US, and the Euro area is renewed once a year after the Flow of Funds Accounts is released in June.

The Bank of Japan retroactively revises data for the Flow of Funds Accounts (FFA), in principle once a year, to reflect information updates, such as newly obtained source data and institutional changes, and to incorporate revised estimation methods. The retroactive revision of 2026 was implemented on June 25 and data from the first quarter of 2005 onward has been updated accordingly. The majority of the revision contents are unchanged from the Planned Retroactive Revision to the Flow of Funds Accounts [Archived PDF] released on May 25, 2026.

To download the retroactively revised data, please use the BOJ Time-Series Data Search.

Monthly Report on the Services Producer Price Index

Read the full May report [Archived PDF]

Updates to the Bank of Japan’s statistical data are available at BOJ Time-Series Data Search.

Japan-Watching: Ministry of Finance, Japan

Preliminary determination of Anti-Dumping Duty Investigation of Nickel-added cold-rolled stainless steel coil, sheet, and strip originating in the People’s Republic of China and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu

Upon receipt of an application from NIPPON STEEL CORPORATION [日本製鉄株式会社], Nippon Yakin Kogyo Co., Ltd. [日本冶金工業株式会社], NAS Stainless Steel Strip MFG. Co., Ltd. [ナス鋼帯株式会社の画像] and NIPPON KINZOKU CO., LTD. [日本金属株式会社] on May 12, 2025, the Ministry of Finance (MOF) [財務省] and the Ministry of Economy, Trade and Industry (METI) [経済産業省] began conducting an investigation since July 22, 2025, to determine whether or not to impose an anti-dumping duty on Nickel-added cold-rolled stainless-steel coil, sheet, and strip^a originating in the People’s Republic of China^b and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu.
1. Note: An alloy steel containing 10.5% or more of chromium and containing by weight more than 0.6% nickel. The characteristics of this product are that it combines corrosion resistance, the functionality of steel, and a beautiful and clean design by manufacturing methods. Also, it is used in various fields of demand.
2. Note: Excluding the regions of Hong Kong and Macau.
MOF and METI have explored objective evidence collected from interested parties, including suppliers in the People’s Republic of China and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, providing opportunities for them to present evidence and to express their views. As a result, MOF and METI today made a preliminary determination in the anti-dumping investigation of the product, presuming the fact of the importation of the dumped product and the fact of the material injury to the domestic industry caused by such importation. (Public Notice on June 19, 2026)

MOF and METI will continue the investigation in accordance with the provisions of the international rules under the WTO Agreements and related domestic laws and regulations, providing the interested parties with an appropriate opportunity to present evidence and express their views relating to the preliminary determination.

Following the further investigation, the Government of Japan will determine whether or not the product has been imported into Japan at dumped prices and if such dumped imports have caused material injury to the domestic industry, and make a decision whether or not to impose a definitive anti-dumping duty on the product.

The interim report on preliminary determination offers details of the investigation.

Reference

Public Notice on June 19, 2026 [Archived PDF]

Interim report on preliminary determination [Archived PDF]

[Provisional Translation, June 19, 2026, Ministry of Finance, Ministry of Economy, Trade and Industry]

Extension of the Period of Investigation of Nickel-added cold-rolled stainless steel coil, sheet and strip originating in the People’s Republic of China and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu

With regard to the Anti-Dumping Duty Investigation on Nickel-added cold-rolled stainless-steel coil, sheet, and strip^a originating in the People’s Republic of China^b and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, the Ministry of Finance (MOF) [財務省] and the Ministry of Economy, Trade and Industry (METI) [経済産業省] have decided to extend the period of investigation by three months until September 21, 2026. The purpose of this extension is to carefully review the evidence and relevant documents submitted by interested parties, while ensuring full transparency and fairness throughout the investigation process.
1. Note: An alloy steel containing 10.5% or more of chromium and containing by weight more than 0.6% nickel. The characteristics of this product are that it combines corrosion resistance, the functionality of steel, and a beautiful and clean design by manufacturing methods. Also, it is used in various fields of demand.
2. Note: Excluding the regions of Hong Kong, China, and Macau, China.
MOF and METI have been conducting the investigation since July 22, 2025. The investigation was to be concluded within one year, but the period can be extended by six months at most if it is found necessary for special reasons.

Reference

Notice of the Ministry of Finance Relating to the Extension of the Period of Investigation (No. 178, June 19, 2026) [Archived PDF]

[Provisional Translation, June 19, 2026, Ministry of Finance, Ministry of Economy, Trade and Industry]

Issues Re-opened through Liquidity Enhancement Auction on June 19, 2026

Securities	Issue Numbers	Re-opened Amounts (billion yen face value)
10-Year	363	133.7
10-Year	364	8.4
10-Year	365	34.8
10-Year	369	27.7
10-Year	370	48.9
20-Year	128	75.1
20-Year	129	110.6
20-Year	132	9.0
20-Year	133	2.5
20-Year	136	4.9
20-Year	142	16.0
20-Year	143	6.8
20-Year	153	2.0
20-Year	154	9.9
20-Year	159	0.7
30-Year	6	5.0
30-Year	7	0.1
30-Year	13	5.0
30-Year	14	0.1
30-Year	15	14.1
30-Year	16	0.2
30-Year	17	25.6
30-Year	19	4.9
30-Year	20	53.0
30-Year	23	8.6
30-Year	24	32.4
30-Year	26	8.9

Result of Liquidity Enhancement Auction on June 19, 2026 (For JGB Market Special Participants)

Auction Date	Issue Date	Amounts of Competitive Bids (billion yen)	Amounts of Bids Accepted (billion yen)	Highest Accepted Spread^*	Allotment for Bids at the Highest Accepted Spread	Average Accepted Spread^*
6/19	6/22	1,897.8	648.9	+0.020%	98.6666%	+0.016%

Note

These columns indicate the spreads from the reference rate.

Auction Result of Treasury Discount Bills on June 19, 2026

Issue Number	Auction Date	Issue Date	Maturity Date	Amounts of Compet. Bids (billion yen)	Amounts of Bids Accepted (billion yen)	Lowest Accepted Price (per 100 yen)	Yield at the Lowest Accepted Price	Allotment for Bids at the Lowest Accepted Price	Weighted Average Price (per 100 yen)	Yield at the Average Price	Amounts of Non-price compet. Auction Ⅰ^* (billion yen)
1389	6/19	6/22	9/24	9,637.50	3,150.38	99.7630	0.9224%	79.2411%	99.7660	0.9107%	949.60

Note

For JGB Market Special Participants.

Interest Rate (June 2026)

Date	1Y	2Y	3Y	4Y	5Y	6Y	7Y	8Y	9Y	10Y	15Y	20Y	25Y	30Y	40Y
6/1	1.123%	1.4%	1.558%	1.775%	1.948%	2.094%	2.243%	2.397%	2.538%	2.682%	3.225%	3.567%	3.871%	3.863%	3.8%
6/2	1.114%	1.38%	1.522%	1.722%	1.889%	2.019%	2.157%	2.31%	2.447%	2.577%	3.141%	3.493%	3.801%	3.81%	3.742%
6/3	1.126%	1.401%	1.56%	1.767%	1.943%	2.077%	2.219%	2.373%	2.508%	2.645%	3.183%	3.521%	3.817%	3.817%	3.748%
6/4	1.148%	1.417%	1.579%	1.787%	1.966%	2.105%	2.242%	2.395%	2.535%	2.671%	3.225%	3.554%	3.835%	3.833%	3.749%
6/5	1.14%	1.412%	1.574%	1.778%	1.955%	2.096%	2.233%	2.391%	2.532%	2.669%	3.222%	3.551%	3.838%	3.841%	3.753%
6/8	1.144%	1.42%	1.588%	1.793%	1.978%	2.128%	2.274%	2.432%	2.575%	2.715%	3.269%	3.604%	3.878%	3.876%	3.789%
6/9	1.146%	1.42%	1.582%	1.784%	1.962%	2.101%	2.242%	2.398%	2.537%	2.669%	3.217%	3.543%	3.824%	3.823%	3.759%
6/10%	1.147%	1.426%	1.594%	1.796%	1.971%	2.112%	2.257%	2.412%	2.549%	2.681%	3.218%	3.538%	3.806%	3.811%	3.739%
6/11	1.149%	1.427%	1.592%	1.792%	1.963%	2.108%	2.258%	2.411%	2.551%	2.682%	3.23%	3.554%	3.821%	3.823%	3.774%
6/12	1.15%	1.417%	1.579%	1.772%	1.938%	2.077%	2.218%	2.373%	2.511%	2.643%	3.189%	3.508%	3.77%	3.767%	3.713%
6/15	1.141%	1.409%	1.556%	1.743%	1.901%	2.039%	2.175%	2.322%	2.46%	2.589%	3.143%	3.461%	3.73%	3.725%	3.674%
6/16	1.147%	1.414%	1.585%	1.783%	1.945%	2.084%	2.227%	2.382%	2.522%	2.655%	3.206%	3.52%	3.763%	3.747%	3.692%
6/17	1.139%	1.398%	1.552%	1.745%	1.897%	2.034%	2.182%	2.335%	2.479%	2.613%	3.17%	3.49%	3.741%	3.709%	3.654%
6/18	1.146%	1.4%	1.553%	1.746%	1.898%	2.045%	2.193%	2.353%	2.497%	2.628%	3.19%	3.512%	3.765%	3.737%	3.68%

Treasury Discount Bills to Be Auctioned on June 26, 2026

1. Auction Date:	June 26, 2026
2. Issue Date:	June 29, 2026
3. Maturity Date:	September 28, 2026
4. Offering Amount:	About 4,100 billion yen
5. Others:	The above offering amount may be changed. In such a case, the revised amount will be announced on the day before the auction date.

[Provisional Translation, June 19, 2026, Ministry of Finance]

Economics-Watching: BRICS Currency Creates Dilemma for the Dollar

by Christopher Whalen, from China Daily

The term “BRICS currency” typically refers to a hypothetical or proposed unified currency for the BRICS grouping. It’s not a single, physical currency currently in use, but rather a concept for a potential future monetary system that some suggest will reduce the dominance of the U.S. dollar in international trade and finance.

Is BRICS currency cooperation about immediate de-dollarization or long-term financial sovereignty? The answer is that BRICS cooperation may include reducing long-term dependence on the dollar as a means of exchange. The dollar is involved in more than half of all trade and 80 percent of all foreign exchange transactions. BRICS currency cooperation aims to gradually reduce the group’s dollar dependency, but challenges remain.

The BRICS concept came about not because the dollar is unsuitable as a means of exchange or unit of account, but rather because of the use of the dollar by Washington as a weapon. As I note in my book, Inflated: Money, Debt and the American Dream, the special role of the dollar in U.S. finance allows the U.S. government to impose harsh compliance and reporting requirements on foreign nationals and institutions. The U.S. is an arbitrary hegemon and does not follow reciprocity with other countries.

The global role of the dollar is an anomaly, the byproduct of two world wars had left the other antagonists broke by the time the Bretton Woods Agreement was signed in July 1944.

Choosing the fiat paper dollar as the default global reserve currency more than seven decades ago reflected the fact that the United States was one of the victors and possessed the wealth that gave Washington unchallenged economic leadership. Prior to World War I, the United Kingdom’s pound sterling was the global standard, but importantly, this paper currency was backed by gold — the only money that is not debt. The dollar, too, was backed by gold — until 1933, when the Franklin Roosevelt administration confiscated gold in private hands to prevent his government from collapsing.

Pound notes started to circulate in England in 1694, shortly after the establishment of the Bank of England. The paper pound helped to fuel the expansion of the British Empire, in large part because the only competing form of money was physical gold. When Britain and other nations left the gold standard in the 1930s, it was due to the deflation caused by the Great Depression rather than a deliberate choice.

The 19th-century rule attributed to English journalist and businessman Walter Bagehot says that in times of crisis, lend freely at a high rate against good collateral. Yet since the currency devaluation and gold seizures of 1933, fiat currencies and below-market interest rates have been the rule. In a global scheme in which the government occupies the prime position, the operative term remains “financial repression”, whereby governments control markets and artificially suppress rates of return on debt. For this reason, the dollar is losing its role as a store of value to gold.

The fact that the dollar continues to trade strongly versus other currencies reflects the reality that as the main means of exchange globally, the dollar cannot be easily replaced. One reason for this continued support for the dollar is that the trade in petroleum and other commodities is so large that it requires an equally large currency to accommodate it. Also, neither the Europeans nor the Japanese, the only two possible alternatives, are willing to risk the external deficits or inflation that the U.S. suffers as the host for the global currency.

What global currency will replace the fiat paper dollar? None. As this article is being written, gold is the second-largest reserve asset for central banks after the dollar. “The initiation in 2002 of the Shanghai Gold Exchange was of great strategic significance, both for gold and the global monetary system,” notes veteran gold fund manager Henry Smyth in an interview in The Institutional Risk Analyst. “Now it is completely clear what happened.”

Smyth and many other observers see the creation of the SGE in 2002 as the return of gold to the international monetary system. But while gold is growing in importance as a reserve asset for many countries, it does not mean that the role of the dollar as a global means of exchange or unit of account is about to change.

The dollar will remain the dominant asset. And even then, displacing the dollar will require a major change in the international monetary system, a change that is already underway.

The author is the chairman of Whalen Global Advisors LLC in New York and the author of Inflated: Money, Debt and the American Dream published by Wiley Global (2025).

Economics-Watching: Kuwait’s Banking Sector Posts Solid Credit Growth in October

[from NBK Group’s Economic Research Department, 21 November, 2024]

Kuwait: Solid credit growth in October driven by household credit. Domestic credit increased by a solid 0.4% in October, driving up YTD growth to 2.9% (3.2% y/y). The recovery in household credit continued, with growth in October at a solid 0.5%, resulting in a YTD increase of 2.4%. While y/y growth in household credit remains a limited 2.3%, annualized growth over the past four months is a stronger 4.7%. Business credit inched up by 0.2% in October, pushing YTD growth to 3.6% (2.9% y/y). Industry and trade drove business credit growth in October while construction and trade are the fastest growing YTD at 17% and 8%, respectively. In contrast, the oil/gas sector continued its downtrend, deepening the YTD decrease to 13%. Excluding the oil/gas sector, growth in business credit would increase to a relatively good 5% YTD. Looking ahead, the last couple of months of the year (especially December) are usually the weakest for business credit, likely due to increased repayments and write-offs, but it will not be surprising if the recovery in household credit is generally sustained, especially given the commencement of the interest rate-cutting cycle. Meanwhile, driven by a plunge in the volatile public-institution deposits, resident deposits decreased in October, resulting in YTD growth of 2.4% (4.2% y/y). Private-sector deposits inched up in October driving up YTD growth to 4.5% compared with 10% for government deposits while public-institution deposits are a big drag (-14%). Within private-sector KD deposits, CASA showed further signs of stabilization as there was no decrease for the third straight month while the YTD drawdown is a limited 1%.

Chart 1: Kuwait credit growth

(% y/y)

Chart 2: UK inflation

(%)

Egypt: IMF concludes mission for fourth review, sees external risks. The IMF concluded its visit to Egypt after spending close to 2 weeks, holding several in-person meetings with the Egyptian authorities, private sector, and other stakeholders. The IMF released a statement mentioning that the current ongoing geopolitical tensions in the region in addition to an increasing number of refugees have affected the external sector (Suez Canal receipts down by 70%) and put severe pressure on the fiscal front. The Fund acknowledged the Central Bank of Egypt’s commitment to unify the exchange rate, maintain the flexible exchange rate regime, and keep inflation on a firm downward trend over the medium term by substantially tightening monetary policy. It also highlighted that continued policy discipline was also a key to containing fiscal risks, especially those related to the energy sector. The Fund, as always, re-iterated the need for promoting the private sector mainly through an enhanced tax system and accelerating divestment plans of the state firms. Finally, it also said that the discussions would continue over the coming days to finalize the agreement on the remaining policies and reform plans. However, the release did not provide any clear hints about the conclusion on the government’s earlier request to push the timeline of some of the subsidy moves.

Oman: IMF completes article IV with a strong outlook for the economy in 2025. Oman’s economy continued to expand with growth reaching 1.9% in the first half of 2024 (versus 1.2% in 2023), despite being weighed down by OPEC+ mandated oil production cuts as non-oil GDP grew a stronger 3.8% y/y in H1 (versus 1.8% in 2023). The fiscal and current account balances remain in a comfortable situation evident by a decline in public sector debt and the recent rating upgrade to investment grade. The Fund expects Oman’s economic growth to see a strong rebound in 2025, supported by higher oil production. It also believes that fiscal and current account balances will remain in surplus but at lower levels. Key risks to the outlook stem from oil price volatility and intensifying geopolitical tensions. The IMF also mentioned that further efforts are needed to raise nonhydrocarbon revenues through more tax policy measures and the phasing out of untargeted subsidies which should help in freeing up resources to finance growth under the government’s diversification agenda.

UK: Inflation rises more than forecast, reinforcing BoE’s caution on rate cuts. UK CPI inflation increased to 2.3% y/y in October from 1.7% the previous month, slightly above the market and the Bank of England’s forecast of 2.2%. On a monthly basis too, inflation rose to 0.6%, a seven-month high, from September’s no change. The steep rise was mainly driven by an almost 10% rise in the household energy price cap effective from October. Core inflation also accelerated to 3.3% y/y (0.4% m/m) from 3.2% (0.1% m/m). While goods prices continued to fall (-0.3% y/y), service prices rose at a faster rate of 5% from 4.9%. Recently, the Bank of England had cautioned about inflation quickening next year (projecting a peak rate of 2.8% in Q3 2025), citing the impact of higher insurance contributions and rising minimum wages as outlined in the latest government budget. Therefore, with inflation rising above forecast, the bank will likely slow the pace of monetary easing after delivering two interest rate cuts of 25 bps earlier, with markets now seeing only two additional cuts by the end of 2025.

Eurozone: ECB warns of fiscal and growth risks in its latest Financial Stability Review [archived PDF]. In its most recent Financial Stability Review (November) [archived PDF], the European Central Bank warned that elevated debt and fiscal deficit levels and anemic long-term growth could expose sovereign debt vulnerabilities in the region, stoking concerns of a repeat of the 2011 sovereign debt crisis. Maturing debt being rolled over at much higher borrowing rates raising debt service costs poses risks to countries with little fiscal space and leaves certain governments exposed to market fluctuations. The bank also emphasized the risks of high equity valuations, low liquidity and a greater concentration of exposure among non-banks. Moreover, it sees current geopolitical uncertainties and the possibility of more trade tensions as heightening risks. The Eurozone’s current government debt-to-GDP ratio stands at 88%, but the underlying data suggest a much more precarious situation with Greece, Italy, and France’s ratios at 164%, 137% and 112%. Recently, concerns about France’s high fiscal deficit (around 5.9% of GDP) and elevated debt levels saw yields on the country’s bonds rise steeply, widening the spread gap with German bonds to the highest level in over a decade.

Stock markets	Index	Daily Change (%)	YTD Change (%)
Regional
Abu Dhabi (ADI)	9,405	-0.23	-1.80
Bahrain (ASI)	2,043	-0.37	3.62
Dubai (DFMGI)	4,761	0.61	17.26
Egypt (EGX 30)	30,588	-0.33	23.18
GCC (S&P GCC 40)	709	0.09	-0.52
Kuwait (All Share)	7,353	-0.08	7.86
KSA (TASI)	11,868	-0.07	-0.83
Oman (MSM 30)	4,609	0.00	2.10
Qatar (QE Index)	10,438	0.12	-3.62
International
CSI 300	3,986	0.22	16.17
DAX	19,005	-0.29	13.45
DJIA	43,408	0.32	15.17
Eurostoxx 50	4,730	-0.45	4.60
FTSE 100	8,085	-0.17	4.55
Nikkei 225	38,352	-0.16	14.61
S&P 500	5,917	0.00	24.05

3m interbank rates	%	Daily Change (bps)	YTD Change (bps)
Bahrain	5.86	-1.29	-66.34
Kuwait	3.94	0.00	-37.50
Qatar	6.00	0.00	-25.00
UAE	4.43	3.81	-89.96
Saudi	5.50	-4.75	-73.14
SOFR	4.52	-0.09	-81.13

Bond yields	%	Daily Change (bps)	YTD Change (bps)
Regional
Abu Dhabi 2027	4.66	5.00	33.9
Oman 2027	5.49	6.00	33.0
Qatar 2026	4.68	6.00	16.1
Kuwait 2027	4.69	3.00	35.0
Saudi 2028	4.96	1.00	43.9
International 10-year
US Treasury	4.41	1.77	55.3
German Bund	2.34	0.35	31.2
UK Gilt	4.47	2.60	93.0
Japanese Gov’t Bond	1.07	1.0	45.4

Exchange rates	Rate	Daily Change (%)	YTD Change (%)
KWD per USD	0.31	0.04	-0.05
KWD per EUR	0.32	-0.46	-1.98
USD per EUR	1.05	-0.49	-4.47
JPY per USD	155.43	0.50	10.19
USD per GBP	1.27	-0.25	-0.62
EGP per USD	49.67	0.34	61.00

Commodities	$/unit	Daily Change (%)	YTD Change (%)
Brent crude	72.81	-0.68	-5.49
KEC	73.78	0.74	-7.26
WTI	68.87	-0.75	-3.88
Gold	2,648.2	0.80	28.40

Disclaimer: While every care has been taken in preparing this publication, National Bank of Kuwait accepts no liability whatsoever for any direct or consequential losses arising from its use. Daily Economic Update is distributed on a complimentary and discretionary basis to NBK clients and associates. This report and previous issues can be found in the “News & Insight / Economic Reports” section of the National Bank of Kuwait’s web site. Please visit their web site, nbk.com, for other bank publications.

Economic-Watching: Japanese Ministry of Finance Info, July 2024

[from the Ministry of Finance, Japan]

Interest Rates (July 17, 2024)

Date	1Y	2Y	3Y	4Y	5Y	6Y	7Y	8Y	9Y	10Y	15Y	20Y	25Y	3oY	40Y
7/1	0.175	0.36	0.39	0.492	0.615	0.662	0.762	0.862	0.962	1.083	1.549	1.873	2.058	2.163	2.351
7/2	0.176	0.365	0.401	0.508	0.63	0.679	0.786	0.89	0.985	1.104	1.573	1.894	2.075	2.174	2.352
7/3	0.166	0.35	0.391	0.493	0.613	0.664	0.778	0.886	0.984	1.1	1.579	1.908	2.088	2.185	2.364
7/4	0.148	0.34	0.382	0.482	0.599	0.645	0.754	0.863	0.967	1.086	1.571	1.908	2.092	2.188	2.364
7/5	0.148	0.346	0.382	0.483	0.598	0.635	0.745	0.85	0.958	1.072	1.566	1.902	2.098	2.2	2.379
7/8	0.15	0.362	0.398	0.499	0.616	0.655	0.764	0.869	0.974	1.092	1.576	1.907	2.099	2.2	2.385
7/9	0.14	0.353	0.391	0.484	0.61	0.64	0.748	0.856	0.96	1.079	1.573	1.911	2.103	2.205	2.398
7/10	0.131	0.343	0.387	0.48	0.605	0.649	0.756	0.865	0.969	1.093	1.586	1.924	2.115	2.22	2.415
7/11	0.131	0.343	0.392	0.485	0.611	0.654	0.756	0.864	0.969	1.089	1.585	1.912	2.112	2.221	2.419
7/12	0.122	0.333	0.378	0.47	0.586	0.624	0.723	0.831	0.936	1.055	1.539	1.873	2.073	2.177	2.387
7/16	0.111	0.32	0.363	0.456	0.566	0.606	0.705	0.809	0.914	1.032	1.524	1.86	2.061	2.168	2.375
7/17	0.115	0.33	0.374	0.467	0.577	0.62	0.72	0.824	0.924	1.042	1.528	1.861	2.055	2.173	2.376

[download CSV]

Announcement of 40-year Japanese Government Bonds to Be Issued in July 2024

[Provisional Translation]

July 17, 2024

Ministry of Finance

Auction Date: July 24, 2024
Issue Date: July 25, 2024
Maturity Date: March 20, 2064
Offering Amount: About 700 billion yen

* 40-year Japanese Government Bonds to be issued in July will be a reopening issue of the May 2024 issue. The auction method is Dutch-style-yield-competitive auction at intervals of 0.5bp.

JGB Monthly Newsletter (July 2024)

Read the full newsletter (in English) [archived PDF]

Zheng Yongnian (郑永年) on How to Address Western Public Opinion on China: Facts, Science and Reason

[from Pekingology at the Center for China and Globalization (CCG)]

“Be open, open, and more open,” especially to businesses, investors, media, universities, and research institutions. And tit-for-tat doesn’t work, the professor says.

by Zichen Wang, Shuyuan Han, and Li Huiyan

Professor Zheng Yongnian (郑永年), the Founding Director of the Institute for International Affairs at the Chinese University of Hong Kong, Shenzhen, on January 28 published an article on how China should address Western public opinion on China. His advice is in the last part of the article, and below is a translation.

(Emphasis by Pekingnology.)

First, we need to understand how such narratives are formed. Historically, China held a bias due to its self-isolation and limited knowledge of the West. Despite losing the two Opium Wars, Chinese intellectuals at that time still saw Westerners as uncivilized. It was not until China was defeated by Japan, a neighboring country once considered as China’s student, that they realized their ignorance and a need for reform. Before China’s Reform and Opening up, Chinese people barely knew anything about the West. They always assumed Westerners were in deep distress, repeating the same lack of understanding of the West.

Similarly, the West’s uncertainty and fear towards China’s rise stem from a lack of understanding and even fear of the country, and their ingrained ideology would lead to misconceptions.

China is the world’s second-largest economy. The externalities and influence of its economy on the West are obvious. Upon joining the WTO, some Chinese people also felt unsettled by the externalities of the West. Some said, “the wolf is coming.” Now it is the West that is experiencing such worries.

It is crucial to recognize the significant impact of the Western hypocritical narratives against China, even if they are based on ideology rather than facts. We must also acknowledge that ideology-based public opinion from the West can exert a powerful influence on their policies toward China.

Historically, the West tended to demonize others while presenting themselves as morally superior, which enabled them to apply Social Darwinism to international politics easily and thus legitimizing conflicts and even wars with other nations. Given the Soviet Union’s failure in the ideological arena during the Cold War, we should by no means ignore any ideology-based public opinion toward China from the West.

Second, to make rational responses to the Western ideology-based criticisms, we should draw lessons from the history of the world economy, such as the lessons of the Soviet Union, as well as our practices, such as the rhetorical battle with the West in the past few years. Coming up with an externally-facing public opinion based on a different ideology is not the most effective in addressing public opinion attacks based on an ideology. Empirically, tit-for-tat is ineffective and can worsen the situation. Again, the failure of the Soviet Union is a prime example, as its battle with a Western ideology failed. When faced with China-demonizing based on ideology from the West, we need to do the simplest thing, namely resorting to facts, science, and reason.

Third, and most importantly, China needs to prioritize its sustainable development, which ultimately benefits the country itself. It is important to recognize that the foundation of the government’s governance lies in its citizens, not Western praise. The support from its people is crucial for both the nation’s longevity and stability., China’s sustainable development also benefits the world economy by boosting its growth. As mentioned above, China has been the largest contributor to the growth of the world economy since it joined the WTO.

It is crucial to prioritize the building of a knowledge system based on China’s practical experiences. Regarding global soft power, we need a knowledge system based on our experiences rather than a certain ideology. While there has been a proposal for an autonomous knowledge system, continuous effort is still required.

Fourth, given the substantial externalities of our economy, we must further communicate and coordinate with other countries on economic policies, regardless of their respective sizes. Our duty is to fulfill the responsibility as a major player in the international community, which also benefits China.

After the 1997-1998 Asian financial crisis, China promised not to devalue its currency, and that commitment became an international public good in Asia. Similarly, after the global financial crisis from 2007 to 2008, China made similar contributions. As China re-opens its economy after the pandemic, it is important not only to take note of the hypocritical comments from certain quarters in the Western world but also to recognize the positive evaluations and high expectations from many international organizations.

Fifth, we must be open, open, and more open. Despite China’s efforts, there remains a persistent ideological camp in the West that views China through an ideological lens, a situation made worse by the past three years of the pandemic. The pandemic was so severe that it hindered travel across borders; as a result, some Western media and scholars tend to assess China through ideology since they couldn’t come here to see the facts with their own eyes.

The assessment of China through a uniform ideological lens appears to have strengthened the original Western ideological camp. However, the United States and the West have more than one ideology, and not all people believe in the prevailing ideology in the public opinion sphere. China’s openness provides a “seeing is believing” opportunity for different groups in the West. China should increase its openness to Western groups, including businesses, investors, media, universities, and research institutions. The changes in their understanding could render those ideological-based public opinions less effective.

Facing the Global South: Building a New International System by Yang Ping

“If you raise [the development of the BRI] to the strategic level, there are countries where … you will have to lose money and there are countries where you will be free to make money.”

by Thomas des Garets Geddes, Sinification

Dear Everyone,

How to respond to the growing political divide between China and the West marked by partial decoupling, security alliances, and the risk of sanctions, amongst other things, continues to be a major topic of discussion among China’s intellectual elite. As already evidenced in previous editions of this newsletter, opinions vary considerably. Those presented here so far have ranged from Da Wei (达巍) stressing the importance of preserving if not strengthening ties with the West and Shen Wei (沈伟) arguing in favor of reforming the WTO and building up a network of free trade agreements to Ye Hailin (叶海林) emphasizing the need for China to demonstrate its military might to demobilize U.S. allies and Lu Feng (路风) calling for self-reliance and greater assertiveness in the field of tech. A certain amount of overlap certainly exists among these perspectives but the differences are nonetheless striking.

Today’s edition of Sinification looks at a speech made last month by Yang Ping (杨平), head and editor-in-chief of the highly regarded Beijing Cultural Review (文化纵横, hereafter BCR). Yang is also director of the Longway Foundation (修远基金会) which publishes BCR. The foundation describes its publication as “the most influential magazine of intellectual thought and commentary in China” and sees itself as having a key role in helping shape the direction of intellectual debates in China (“议题的设置就是意识形态斗争成功的一半”). Indeed, BCR often republishes old articles at key junctures as so often highlighted by David Ownby’s wonderful Reading the China Dream.

The following are excerpts from an edited transcript of a speech by Yang made at an event hosted by Renmin University’s Chongyang Institute for Financial Studies, which was attended by China’s Vice-minister of foreign affairs Xie Feng (谢锋). In his speech, Yang advocates building a new international system led by countries in the Global South (which, of course, includes China) rather than the West. His ideas are not particularly novel but are nevertheless noteworthy in that they represent yet another viewpoint in the ongoing debate over how China should respond to the increasing tensions that characterize its relations with the U.S. and other Western countries. Next week, I will be sharing a somewhat longer piece that proposes a way of protecting China from the growing threat of Western sanctions.

Yang’s speech in a nutshell:

“Capitalist politics” are no longer in line with “capitalist economics.” The former now undermines globalization, while the latter supports it.
Sanctions, export controls, friend-shoring and alliance-building are damaging the world economy and further alienating China from the current U.S.-led international order.
China must respond to this growing trend by building a “new type of international system” with other countries in the Global South.
BRI projects should be increasingly focused on achieving this goal and thus allow more room for loss-making endeavors.

Capitalist politics ≠ Capitalist economics

“Since 2022 and the Russo-Ukrainian conflict, our main focus and topic of discussion has been China’s construction of a new type of international system.

“The most important feature of today’s world is the beginning of a separation between capitalist politics and capitalist economics. The capitalist political order and the capitalist economic order do not support each other [any longer].

“We have witnessed two typical manifestations of the separation of politics and the economy and the impact of politics on the economy:

The first is the conflict between Russia and Ukraine. The sanctions imposed on Russia by the United States and the West have reached unthinkable, abominable [令人发指] and unimaginable proportions. Under established international rules, it was understood that such sanctions could not possibly occur, but now they have. These include the fracturing of the financial system, the expropriation and seizure of Russian private assets and the freezing of Russian foreign exchange reserves. These are all abominable and unimaginable forms of confrontation. At the same time, the Russo-Ukrainian conflict has led to serious disruptions in global food and energy systems and supply chains, with massive food ‘shortages’ and soaring food prices, particularly in developing countries. Sanctions and political repression [政治打压] have severely disrupted the [world’s] economic order.

The second is the conflict between the U.S. and China. Since the Trump era, the U.S. has been engaged in a trade war against China, mainly by raising tariffs. Basically, this was simply about balancing trade [with China] and used mainly economic means. But under Biden, it [has become] a war that mixes politics with economics. Biden’s strategy towards China can basically be summed up in just a few words: one, friend-shoring, [i.e.] only allowing friendly countries into [parts of] its supply chains; two, alliance politics, [i.e.] continuously forging an alliance system involving NATO, the European Union, Japan, AUKUS and the four Asia-Pacific countries [I assume he is referring to South Korea, Japan, New Zealand and Australia taking part for the first time in a NATO summit last year] and constantly opposing China [不断应对中国]; three, its so-called ‘precision strikes’, [i.e.] its radical crackdown on China’s high tech [industry], especially our chip industry.”

China is being pushed out of the U.S.-led international system

“The information I have seen so far is that the number of Chinese companies included in the U.S.’s ‘entity list’ has risen from 132 under Trump to over 530 now. The scope of such point-to-point [点对点] precision strikes is constantly expanding. With such a political impact on the economy, we can feel the [world’s] economic order being disrupted across the board. The world is moving inexorably in the direction of decoupling. The phenomenon of politics affecting the economy and the capitalist political order no longer upholding the capitalist economic order are extremely striking.

“In such a context, the challenges now facing China are extremely serious and varied. We have the pressures of dealing both with containment in the Indo-Pacific and with the U.S.-led politics of alliances across the world. More importantly and fundamentally China faces the strategic task of building a new type of international system [新型国际体系] … The existing Western-dominated international system used to be one in which we tried hard to blend [so as] to become one with it. During this process, we [sought to] absorb the West’s advanced technologies and management [practices] and thus complete our mission of industriali s ation and modernization.

“But once you enter the existing international system, he [who is already inside] does not want to play with you, and even wants to drive you back out. He wants to divide both supply chains and the economic system into two parts [搞成两套] and desperately wants to contain and suppress you. This is not something that can be determined by your own subjective preferences. He has made up his mind: you have already become his ‘fated opponent’ [命定的对手]. He has to suppress you and drive you out of the existing system.”

Building a new international system with the Global South

“It is at this point that China is faced with the task of constructing a new type of international system that is not dominated by the West. In today’s so-called strategic quadrangle consisting of the U.S., Europe, Russia and China, how to construct such an international system appears particularly difficult [逼庂 literally means ‘narrow’ or ‘cramped’ rather than ‘difficult’].

“But if we look a little further south, we will find a vast number of developing countries, the Third World and the countries of the global South. They should be our strategy’s depth [我们的战略纵深]. That is to say, [we should] build a new type of international relations and a new type of international system that has strategic depth and in which China and the countries of the global South are jointly integrated. [This] is, in my view, an important strategic task for China’s international relations in the coming decades.”

BRI projects: Strategy trumps profitability

“For China today, especially for businesses and governments at all levels [within China] that are currently working hard to develop BRI trade, there is a very important point to which they should be alerted or reminded about: the development of the BRI has to go beyond mere business, beyond the general export of [China’s excess] production capacity, beyond the partial thinking of industry and the partial thinking at the regional level, or the simple economic way of thinking of business. The development of the BRI should be considered at the strategic level. That is, it should be included into China’s strategy when thinking about Africa, South America, Southeast Asia and Central Asia.

“If you raise [the development of the BRI] to the strategic level, there are countries where you won’t be able to make money and will have to lose money, and there are countries where you will be free to make money. You have to unite the two within your organic strategy.

“The strategic task of building a new type of international system is, in my view, a strategic proposition that Chinese think tanks and research institutes should pay very close attention to with regards to international relations.

“Time is limited today. I just wanted to make a start here. I hope to receive your corrections and criticisms. Thank you!”

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The recessive importance of the Global South was previously explored by Richard and his partner Larry, with input from Supratik Bose, many decades ago as shown here.