NIKKEI 225 LONG Japan 225, DailySPREADEX:NIKKEIOFFICIALHARDYFXNIKKEI Decades of deflation during Japans's lost years were challenged deeply by a series of external economic shocks to the Japanese economy. As best as monetary and fiscal policy can try to control the every day lives of a population, what a central bank or a government cannot do is to wrap themselves in cotton wool when we live in uncertain times. Covid. The Ukraine war. The trip tariffs and now the Iranian conflict has put Japan in a dilemma whereby inflation is creeping back into the economy and as a result, domestic businesses and investors are becoming increasingly incentivised to exit their carry trade positions overseas and invest into domestic equities. As bond yields rise to decade long highs, the yen is devalued even further and thus if you take intro perspective the costs that larger Japanese investors absorb with the higher bond yields and the fx hedge costs, a Japanese investor today is clearly looking to sell their holdings overseas and invest into the Nikkei. With a new political regime that has announced a generational fiscal stimulus package in order to support gdp and tackle Japans debt to income ratio, money shall surely move into the Japanese equity market. The carry trade may be over. However, the fx carry trade is not. All of this comes at a price and the road that the current prime minister has taken is one that sacrifices its currency in order to control inflation and support economic growth. Yen devaluation shall continue for now.