If price stability is the legal mandate of the Bank of Japan (BOJ), and the central bank’s official target for price stability is 2%, as measured by the Consumer Price Index (CPI),* then why are fluctuations in prices the norm for Japan?
Across the developed markets, central banks have embarked on a tightening path—with one exception: the Bank of Japan (BOJ).
China’s currency, the renminbi (RMB), remains strong even though many of the factors that have driven its performance over the last two years have weakened.
Many investors with exposure to the Chinese renminbi (RMB), having enjoyed a strong rally in the second quarter, are worried that policy uncertainties could hurt the currency’s short-term outlook.
Government bond yields have tumbled globally but China’s yields have risen to pre-COVID-19 levels. The RMB hasn’t yet reacted to the favorable rate difference, and we think bond yields are likely to decline moving forward—a favorable landscape for China bonds.
Donald Trump’s policies appear almost certain to contribute to volatility in Asian markets during 2017. For active fixed-income investors who understand the dynamics of bonds and currencies in the region, this creates opportunities.