Yen weakness has been driven by foreign investors hedging Japanese equity gains, not just structural outflows. Fundamentals will eventually support the yen as FDI and exports grow, and the BOJ is expected to hike in October. Positioned for yen to strengthen towards 152 from 157.
Oil production will increase as more ships pass through the Strait of Hormuz, but prices are not expected to return to pre-conflict levels, keeping upward pressure on inflation.
Energy crisis fuels broader inflation and supply rethink.
The energy crisis will lead to stronger headline inflation, with spillovers to second-round impacts like plastics, chemicals, and fertilizers. In Asia, this combines with a strong food price wave. Countries will look to improve supply resilience, potentially leading to stronger demand for energy infrastructure and alternative sources in the longer term.