BlackRock Investment Institute Videos

Market take Weekly video_20260908 Ben Powell Chief Investment Strategist for the Middle East and APAC BlackRock Investment Institute SCRIPT Header: CAPITAL AT RISK. MARKETING MATERIAL. Opening frame: What’s driving markets? Market take Camera frame Title slide: Why Japan matters for U.S. bond investors Rising Japanese government bond yields and a weak yen put pressure on the Bank of Japan to raise interest rates faster. 1: A new alternative So, what’s changed in Japan? A 10-year Japanese government bond now yields around 3% — the most in three decades. That’s more than what a Japanese investor would get on a 10-year U.S. Treasury after hedging it back to the yen. It gives Japanese investors a much more viable alternative. On top of this, the Bank of Japan is in a tricky position. Underlying inflation pressure persists and wages are rising. That would typically warrant higher interest rates. But raising rates also makes Japan’s large government debt more expensive to manage. Markets now expect the Bank of Japan to raise rates this month. 2: A global matter Here’s why it matters globally. For years, extremely low bond yields encouraged Japanese investors to look overseas for income. Japan still holds around $1.1 trillion in U.S. government bonds. As domestic yields become more attractive, fresh demand for foreign bonds could soften. That matters when governments and companies are already fighting hard to attract capital – including for projects related to the AI buildout. U.S. officials are clearly watching too. The U.S. Treasury joined Japan’s recent currency intervention to support the yen. We think that underlines how closely Japan’s markets are linked to global financial conditions. 3: Selectivity is key We stay cautious on Japanese government bonds because we think yields could keep rising. But higher rates aren’t necessarily bad for riskier assets. We’re neutral on Japanese stocks overall, seeing opportunities in areas like financials, physical AI and companies benefitting from greater capital spending and corporate reforms. Outro: Here’s our Market take Japan’s shift to higher rates matters well beyond its borders. It’s not driving this global reset in bond yields, but it is an important channel for how that reset spreads. This keeps us cautious on Japanese government bonds and selective across Japanese risk assets. Closing frame: Read details: blackrock.com/weekly-commentary