Good morning. Unhedged has long depended on the work of Matt Klein, mastermind of The Overshoot, a Substack covering “the intersection of economics, finance, business, and public policy,” as well as the author (with Michael Pettis) of the award-winning book Trade Wars Are Class Wars. It’s great fun to have him join us today for a discussion of the puzzle of Japan’s economy and markets. We’re keen to hear your thoughts, too: [email protected] and [email protected].

An economy apart

Unhedged: As most of the world’s major economies have struggled with waves of pandemic-driven inflation and rapid policy tightening designed to address that inflation, Japan has stood apart. In August, Japanese consumer price inflation rose to 3 per cent. That’s a 30-year high, but officials in the US or Europe can only dream of such a low figure. The Bank of Japan, correspondingly, swims against the global tide, keeping monetary policy loose. The result has been a dizzying fall in the yen: