JAPAN PERSPECTIVE

The Japan Times publishes an analytical article titled 'US drops Powell probe, smoothing path for Warsh to lead Fed,' focused on implications for global bond markets. Japan is the largest foreign holder of U.S. Treasuries (approximately 1.1 trillion dollars), and any change in Fed monetary policy has direct effects on this portfolio's value and the yen-dollar rate. The Bank of Japan, which is just beginning to normalize its own interest rate policy after years of negative rates, will need to adapt to the new direction taken by the Fed under Warsh. Tokyo analysts wonder: if Warsh lowers rates faster than Powell, this weakens the dollar against the yen, hurting Japanese exporters. A considerable issue for an economy still heavily oriented toward exports.