● Cash Firehose Exposed, Uptober Sparks, Q4 Bubble Playbook

The Reality of Frightening Money Dispersion and the ‘Uptover’ Signal: A Q4 Playbook for Determining if We’re in the Early Stage of a Bubble

This article contains 10 checkpoints that reveal the true channels of liquidity supply that others overlook.
It structurally explains how cash-dispensing mechanisms are transferred from policies such as tariff rebates and fiscal pipelines under the Trump Administration.
The order in which money flows in the cryptocurrency and stock markets is described, along with practical indicators to distinguish the early, middle, and late stages of a bubble.
It outlines a core-satellite portfolio strategy applicable to real-world investments, prioritizing ETFs and representative stocks, and even details exit strategy triggers.
Global economic trends are optimized in one view through keywords like interest rate cuts, inflation, liquidity, and stock markets.

1) The Actual Channels of Money Injection: “Policy Liquidity → Market Liquidity → Risk Assets”

Liquidity is not just a slogan but a pipeline.
Cash-based policies such as fiscal expenditures, tax cuts/rebates, and tariff rebates are financed through the issuance of government bonds.
The proceeds from these issuances accumulate in the Treasury General Account (TGA) and are later transferred to the accounts of commercial banks, households, and corporations through various expenditures.
During this process, a decrease in the reverse repo (ON RRP) balance and an increase in bank reserves eventually enhance the ability to purchase risk assets.
Market liquidity can be roughly estimated as “the Fed’s balance sheet − TGA − RRP,” which approximates ‘Net Liquidity.’
When this indicator turns upward, cryptocurrencies → high-beta stocks → small/mid-cap growth stocks tend to gain beta sequentially.

The October season (‘Uptover’) is not merely a superstition.
The overlapping of year-end performance pressures on pension funds and mutual funds, the launch of new ETFs, tax rollovers/dividend reinvestments, and the anticipations surrounding Black Friday and year-end consumption often trigger risk-on flows.
However, seasonal factors are matters of probability and not guarantees, so they must be cross-verified with the trends of net liquidity and stablecoin issuance.

Cryptocurrency-specific liquidity is tracked by the market capitalization of stablecoins.
If the new issuance of USDT and USDC increases while stock reductions decrease, trading volumes will structurally grow, and the Bitcoin futures basis (the gap between spot and futures prices) is likely to expand into contango.
A higher carry generated by stablecoin reserves from U.S. Treasuries/T-Bills offers greater incentives to issuers, further spurring their issuance.

2) 10 Signals to Determine if We’re at the Early Stage of a Bubble

The initial stage signal is “when money starts flowing in but there is not yet widespread frenzy.”
Consider the following checklist as a whole.

• Whether net liquidity is turning upward and sustaining a 20-day trend.
• A continuous 4-week increase in stablecoin market capitalization accompanied by a rise in the combined trading volume of spot and futures.
• A gradual expansion of the Bitcoin futures basis into contango (a gradual expansion is normal before overheating).
• Steady net inflows into spot ETFs with no abrupt swings in redemptions or premiums.
• After a rise in BTC dominance, a sequential rotation from ETH to large-cap altcoins is observed, yet it has not reached the stage of extreme altitude in altcoins.
• A recovery in the relative strength (RS) of QQQ compared to ARKK is a typical signal of the early stage.
• An increase in the initiation/applications for leveraged ETFs is noted, but there is not yet a sudden surge in individual credit balances.
• The emergence of new SPAC issuances and renewed demand (with an initial surge in popularity) is observed, though differentiation in quality remains.
• An increase in call skew and small premium purchases in the options market is evident, but it is not at the level of a 0DTE frenzy.
• A ‘quiet rise’ pattern where prices ascend before there is a surge in Google Trends or TikTok view counts.

Conversely, the signals of the later or terminal stages are as follows.
Simultaneous leaps in altcoins, the production of stocks surging by several tens of percent in a single day, individual investors flocking to triple-leveraged ETFs, rapid expansion in the gap between spot and futures, 0DTE gambling, excessive influence of celebrity endorsements, and the point where ARKK underperforms QQQ once again.

3) The Sequence of Money Flow: The ‘Beta Pipeline’ in Crypto and Stock Markets

In the cryptocurrency sector, the rotation tends to follow the order: BTC → ETH → major infrastructure coins (stablecoins, infrastructure, yield-generating tokens) → mid-cap sectors (DePIN, liquid staking, liquid restaking) → small-cap narratives.
In the stock market, it is common to see a shift from mega-cap semiconductor and AI infrastructure stocks → trading platform and fintech stocks → high-growth software and robotics stocks → small-cap biotech, IPOs, and SPACs.
Knowing this sequence can reduce the timing of chasing after price increases and enable a ‘relay strategy’ to move preemptively into less overbought stages.

4) Q4 Playbook: Core, Satellite, and Risk Management

Core positions must be able to withstand volatility.
Use spot ETFs based on Bitcoin and Ethereum exposure as the core, and manage the average purchase price through incremental buying and dollar-cost averaging (DCA).

Satellite positions are structured to benefit from the momentum of liquidity.
– Major cryptocurrency stocks: Diversify among global trading platforms, brokerages/fintech, companies with digital asset reserves/custody strengths, and mining/infrastructure companies.
– Blockchain theme ETFs: For example, using diversified products like BLOK that cover the entire value chain can reduce individual risks.
– AI companion stocks: Allocate to companies benefiting from real CAPEX such as those in GPU, HBM memory, packaging, high-speed networking, data center power/cooling, and power equipment to capture ‘AI-crypto liquidity synergy.’

Risk management rules are more effective the simpler they are.
– Portfolio allocation guidelines: Maintain a ratio of 60% core, 30% satellite, and 10% opportunistic funds with rebalancing according to the situation.
– Instead of immediate stop losses, prioritize “time diversification” and “price diversification,” and only use leverage for trading purposes.
– For triple-leveraged ETFs, impose a 10% account limit and enforce a cooldown rule if the profit/loss reaches -10%.

5) Hard Data Others Overlook: Q4 Checklist

– A simultaneous decrease in the TGA balance and ON RRP balance strongly signals that money is flowing into the market.
– Announcements of Treasury refunding or repaying short-term securities that expand the short-term component by the U.S. Treasury tend to stimulate RRP absorption, which is favorable for net liquidity.
– Check the proportion of T-Bills and the average duration in stablecoin issuers’ reserve asset reports.
– An upward-sloping curve in the net inflows/accumulated AUM of Bitcoin spot ETFs indicates strong bottom-buying.
– If the futures market’s funding rate and basis are “rising without overheating,” it is likely to be in the early or mid-stage.
– The reversal in relative strength from high-beta stocks (such as IBD 50) to mega-caps compared to ARKK/QQQ signals an expansion of the risk-on phase.
– A sudden expansion of HY OAS (high-yield spread) by more than 50 basis points is a warning of risk-off, triggering a position reduction.

6) Interpreting Policy Variables: Interest Rate Cuts and the Reality of ‘Cash Dispersion’

More important than the interest rate cut itself is “the easing of financial conditions that anticipate the cut.”
When expectations of lower rates are priced in, simultaneous effects such as a narrowing of credit spreads, PER re-ratings, and the emergence of a growth-stock duration premium occur.
At the same time, when cash-based fiscal measures such as tariff rebates, tax credits, and subsidies reach households, short-term consumption and risk asset preferences are strengthened.
When these two factors overlap, liquidity surges can persist for longer and more deeply than expected.

However, caution is warranted.
If fiscal shocks trigger a re-ignition of inflation, a rebound in the dollar index and a resurgence in long-term rates may reverse liquidity flows, effectively “recovering liquidity.”
Given global economic conditions, if oil, freight, and wages heat up again, bubble markets may frequently experience sharp “whipsaw” volatility.

7) The Intersection of AI Trends and Crypto: A New Pocket in This Cycle

Investments in AI infrastructure (data centers, power, semiconductors) and digital asset liquidity are likely to move in tandem in this cycle.
An increase in actual CAPEX in the GPU supply chain, expansion of HBM memory capacity, and the resolution of bottlenecks in packaging/advanced photolithography processes will boost equity market beta.
Meanwhile, in crypto, DePIN (decentralized infrastructure), decentralized computing, tokenized real-world assets (RWA), and liquid staking are key to genuine usage demand.
If AI agents increasingly use stablecoins for payment and settlement, stablecoin issuance and trading volumes may trigger a virtuous cycle.

8) Exit Strategies and ‘Warning Light’ Triggers

In a bubble, profits are determined not by entry but by retreat.
Consider scaling back positions by 25% in stages when the following triggers overlap.
– A reversal and persistent drop below the 20-day mark in the ARKK/QQQ relative strength.
– A sharp drop in net inflows into Bitcoin spot ETFs or net outflows lasting more than five trading days.
– A simultaneous expansion of the basis (widening gap between spot and futures) and a surge in the funding rate.
– An expansion in HY OAS, VIX rising above 25, and the DXY breaking above the 105/110 level.
– A transition to a 4-week consecutive decline in stablecoin market capitalization.

9) Calendar and Tactics

Mid-month CPI and end-of-month PCE, the FOMC meetings in October through December, and quarterly Treasury refund announcements are events that generate volatility.
Cryptocurrencies are sensitive to major conferences, policy guideline releases, and ETF-related disclosure schedules, making pre-position adjustments effective.
It is effective to reduce leverage, increase cash holdings 2–3 days before such events, and then re-enter after confirming a trend resumption post-event to avoid losses.

10) Priority List of Stocks and ETFs for Rapid Execution

– Core: Establish a stable foundation with Bitcoin and Ethereum spot ETFs, global large-cap tech ETFs, and gold/cash substitutes (short-term T-Bills).
– Satellite (blue chips): Gradually accumulate positions in global cryptocurrency exchanges, brokerages, companies with strong digital asset reserves/custody, and major mining/infrastructure stocks.
– Thematic ETFs: Diversify with blockchain value-chain ETFs (such as BLOK) and high-beta growth ETFs that possess appropriate scale and liquidity.
– Trading: For triple-leveraged products, utilize them only for short-term, event-driven trading with a 10% account limit and strict profit/loss rules.

During overheated periods, adhering to the “quality, blue-chip, ETF” principle reduces losses.
It is recommended to hold stocks with low default risk, high liquidity, and clear revenue models, while using small-cap/thematic stocks in a cyclical manner after taking profits.

11) Risk Map: Preparing for the Worst-Case Scenarios

– A re-ignition of inflation and a sharp rise in long-term rates may lead to a resumption of valuation compressions.
– Regulatory risks (related to stablecoins, exchanges, accounting, and listing standards) can cause gap-downs without gradual recoveries.
– In a scenario of intensified dollar strength due to geopolitical risks, both emerging markets and crypto beta could suffer downturns.
– Liquidity strains in the bond market could trigger a ‘liquidity lug pull’ from both the stock market and cryptocurrencies.
Hedging should involve maintaining 10–20% cash, combined with protective puts, gold, and a mix of short-term bonds to build multiple layers of defense.

12) Execution Checklist: Actions to Take Immediately

– Bookmark the net liquidity chart and update it weekly.
– Set up a single screen to display the three sets of data: stablecoin market cap, net inflows into spot ETFs, and the futures basis.
– Write down the allocation ratios for core, satellite, and opportunistic funds, and automate buying and selling processes based on incremental/time diversification principles.
– Create a checklist for automatic position reduction if three exit triggers activate simultaneously.
– Deeply track only 2–3 sectors you understand, and manage the rest through ETFs.

FAQ: “Isn’t it too late to get in now?”

The early stage of a bubble always feels like you’re late psychologically.
The key is not to go all-in based on timing, but to use rule-based incremental buying and risk limits.
As long as the direction of liquidity remains consistent, the core should rely on time, satellites on momentum, and trading on rules.

< Summary >

– Liquidity flows through a pipeline of “policy → market → risk assets,” with net liquidity and stablecoin market capitalization serving as key indicators.
– The Uptover anticipation stems from a combination of seasonal effects and overlapping fiscal/financial pipelines, and must be cross-verified using hard data.
– Early-stage bubble signals include a recovery in ARKK/QQQ RS, net inflows into spot ETFs, an increase in stablecoin issuance, and a gradual expansion into contango.
– The playbook is simplified into a core (spot ETFs) + satellite (blue chips/ETFs) + rule-based risk management strategy.
– Pre-define five exit strategy triggers and use phased scaling down to preserve profits.

[Related Articles…]

• U.S. Interest Rate Cuts and the True Path of Liquidity Waves
• Cryptocurrency ETFs and Capital Flows: Q4 Checklist

*Source: [ 소수몽키 ]

– 무서운 돈 살포에 들썩이는 주식들, 버블장 초입의 신호일까

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● China Liquidity Trap Sparks Deflation Shock, Debt Wall, Restructuring Supercycle

Big Cycle of Restructuring for Loss-Making Companies Begins: China in a Liquidity Trap, 2025-2026 Scenario.

Quickly, the core points of this article.

It points out that China’s new yuan loans have turned to an unusual decline, confirming the reality of the liquidity trap.
It dissects the polarization map of the old economy (real estate, mining, textiles) and the new economy (electric vehicles, batteries, semiconductors, communication equipment) using figures and mechanisms.
It explains how the concentration of government subsidies and the expulsion of zombie companies are connected to large-scale restructuring and unemployment.
It outlines how the “maturity wall” of local government financing platforms (LGFV) and the shift in national debt management could change the global economic outlook for 2025-2026.
It presents the trajectory of import deflation due to the US-China Trade War 2.0 and oversupplied exports, along with the implications for exchange rates, raw materials, and Korean exports.
It bundles the investment checklist with trends in restructuring, including overshooting competition in the AI and electric vehicle-driven new economy and constraints on power and semiconductors.

1. 2025-2026 China Economic Outlook: Flow Is More Important Than Numbers.

Growth is likely to slow from high growth to moderate growth, eventually settling in the upper 3% range by 2026.
It is reasonable to view this not as an economic collapse but as a typical case of persistent low growth.
Recent publicly released statistics indicate that new yuan loans in July turned negative for the first time since 2005, which is symbolic.
If banks block credit supply due to risk aversion, even with rate cuts, money will not flow into the real economy, and this structure will become entrenched.
Liquidity is being released, but total demand does not respond, exhibiting a classic liquidity trap.

2. Industrial Polarization: Old Economy vs New Economy, Completely Different Cycles.

The new economy has seen expanding sales and a surge in the number of companies in sectors related to electric vehicles, batteries, solar power, communication equipment, and AI hardware.
In contrast, the old economy—comprising real estate, construction, mining, textiles, and furniture—experiences declining sales accompanied by a rise in non-performing loan ratios.
Even in the Chinese stock market, while major tech stocks are in favor, the proportion of loss-making companies has reached an all-time high, intensifying polarization.
This gap concentrates the targets of restructuring on the old economy, while within the new economy, a dual restructuring emerges where later entrants and small to mid-sized companies with weak profitability are weeded out.

3. The Background of Polarization: Three Mechanisms.

The decline of the old economy stems from prolonged adjustments in real estate prices, excessive inventory, and a balance sheet recession among households, which together stifle demand recovery.
Intensified competition in the new economy occurs as the number of companies surges alongside excess capacity, creating a “paradox of scale” where sales increase but margins per unit shrink.
The concentration of government support—with subsidies and policy financing focused on specific strategic industries—distorts resource allocation and creates inherent risks that immediately shift to restructuring once the subsidies decline.

4. The Onset of Restructuring: Where Will the Collapse Begin.

The ripple effect starts from the real estate value chain (construction, raw materials, heavy equipment, local finances) and spreads to domestic services such as lodging and retail.
In the new economy, as seen by the rapid drop in the number of electric vehicle brands, brand consolidation, M&A, and bankruptcies quickly occur in sectors with excessive entry.
As the proportion of loss-making companies increases and banks tighten their lending, a “shadow credit crunch” may occur where the informal credit network contracts before the bond market.

5. Deflation and the Liquidity Trap: Why Rate Cuts Fail to Work.

Negative trends in producer prices and low consumer prices imply that weak demand and oversupply coexist.
Although policy rates like the LPR have been lowered, banks’ risk premiums remain high, leaving the effective rate felt by borrowers high.
Falling asset prices and income uncertainty among households heighten their propensity to save, curbing consumption and housing demand.
Thus, monetary easing alone is insufficient to revive total demand; qualitative shifts in fiscal policy and structural reforms must go hand in hand.

6. National Debt and Local Government Financing Platforms (LGFV): The 2025-2026 “Maturity Wall” Scenario.

Government debt is mainly problematic due to accumulated borrowing by local governments and their affiliated platforms rather than the central government.
With a slowdown in land use rights revenue, repayment funds have weakened, increasing reliance on refinancing.
If central government support standards are tightened during periods of concentrated maturities, measures such as divestiture of non-core assets, project reorganization, and widened interest rate spreads may follow.
National debt management is likely to shift to a centralized model, and fiscal expenditure may be reallocated to direct domestic sectors such as social safety nets and the purchase of housing inventories.

7. External Variables: US-China Trade War 2.0 and the “Price War”.

If high tariffs and export restrictions persist, China may overcome volume challenges through routes via third countries and price reduction strategies.
This will cause import deflation in regions excluding the United States by reducing the price of imported goods.
Global margin pressures will increase in sectors like steel, chemicals, solar power, batteries, and home appliances, and countries will tighten anti-dumping and subsidy regulations.
The yuan, reflecting slowing growth and policy easing, faces weakness, but drastic fluctuations are likely to be controlled by strengthened foreign exchange management.

8. Impact on Korea and Global Asset Markets.

In raw materials, although industrial metals and oil demand will suppress price volatility at the top end, specific materials (polysilicon, graphite, lithium processing) may continue to suffer from intensified competitive price cuts.
Korean exports will be hit by China’s domestic slowdown, yet a gap opens as low-priced Chinese exports create alternative demand from the United States and Europe that could partially return to Korea.
In the stock market, domestically oriented Chinese shares will be defensive, while companies with significant exposure outside China, as well as high value-added equipment and materials companies, will benefit relatively.
Due to strengthened global deflationary pressures, bonds face greater downside risks in medium- to long-term interest rates, opening opportunities for interest rate-sensitive sectors.

9. Investment Checklist and Strategy.

As oversupplied Chinese sectors trigger a global decline in ASP, investors should first assess cost competitiveness and technological barriers in Korean and global stocks.
The winners of restructuring are likely to be companies benefiting from facility upgrades, testing and inspection, high-efficiency power semiconductors, process automation, or distressed asset acquisition operators.
Hedging exchange rate risk through diversification with dollars, yen, and gold, along with inventory strategies that capitalize on lower import costs during yuan weakness, are effective.
Policy beta is expected in fields anticipated to receive fiscal injection, such as the purchase of housing inventories, social housing, aging infrastructure renovation, and grid investments.
Preference should be given to companies with strong cash flows, low debt, and low proportions of variable-rate borrowings, while long-term projects must verify the mismatch in funding maturities.

10. Leading Indicators and Policy Watchlist.

Monitor whether the trend of new yuan loans and overall social financing volume shifts back to positive.
Keep an eye on housing sales area, inventory clearance periods, and price indices in second- and third-tier cities to see if they rebound.
Pay close attention to LGFV spreads, the scale of replacement issuance of local bonds, and the intensity of central government guarantee comments.
A narrowing negative gap in the PPI coupled with a rebound in service prices is viewed as a signal of alleviated deflation risk.
Along with adjustments in the LPR, observe the direction changes in “structural tools” (PSL, policy bank loans, re-lending quotas).

11. AI and 4th Industrial Revolution Trend Points: The Paradox of the New Economy.

Due to U.S. export controls restricting access to AI accelerators and advanced processes, domestic investment in design and manufacturing is surging in China.
While CAPEX for power, cooling, and data centers is expanding, constraints from the power grid and the efficiency gap in domestic equipment remain a bottleneck for profitability.
Demand for AI servers, communication equipment, and electric vehicle electronic parts remains robust, but excessive competition within the same category could lead to prolonged declines in average selling prices.
Therefore, AI beneficiaries should be selectively focused on segments with high technological barriers such as “power semiconductors, SiC, GaN, thermal management, optical transceivers, and EDA/IP.”

12. Conclusion: Restructuring Is Not the End, But the Beginning.

In the midst of a liquidity trap and deflationary environment, China requires a combination of qualitative fiscal policy and structural reforms rather than mere monetary easing.
As the decline of the old economy and the oversupply competition in the new economy proceed simultaneously, 2025-2026 is likely to see the solidification of loss-making company clean-up and unemployment shocks.
From a global economic perspective, while Chinese-driven import deflation lowers the ceiling for interest rates, margin pressures and trade dispute risks necessitate differentiated approaches across asset classes.
Investors should design portfolios around three pillars: winners from restructuring, beneficiaries of policy spending, and strongholds with technological barriers.

< Summary >China is currently experiencing a liquidity trap and deflation amid persistent low growth.
The combination of an old economy in decline and excessive competition in the new economy heightens the possibility of expanded restructuring and unemployment in 2025-2026.
The maturity wall of LGFVs and the reorganization of subsidies are key variables, with global outcomes including import deflation and margin pressure.
Investment should approach defensively and selectively, focusing on segments with high technological barriers, policy beneficiaries, and companies with solid cash flows.

[Related Articles…]

• China’s Deflation and Liquidity Trap, 2026 Ripple Effects
• Global Restructuring Cycles and the Korean Export Scenario

*Source: [ 경제 읽어주는 남자(김광석TV) ]

– 적자기업들의 역대급 구조조정이 시작된다. 디플레이션의 늪에 빠진 중국, ‘유동성 함정’에 빠졌다. [경읽남 213화]

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● Abenomics 2.0 unleashed – Yen carry turbocharges AI stocks, gold, bitcoin

7 Structural Reasons Why Japan’s New Prime Minister’s ‘Abenomics 2.0’ Is Inevitable and Its Global Ripple Effects

This article contains three elements.
First, it summarizes seven structural reasons—unspoken by anyone—that explain why Japan has no choice but to postpone interest rate hikes and restart liquidity supply.
Second, it details the mechanism by which yen carry trades boost the US AI-led stock market, gold, and Bitcoin along specific channels.
Third, it pinpoints the “invisible impact” of BOJ and public pension fund ETF holdings on the corporate governance of major Japanese companies and the real constraints on exit strategies.
Let’s update the essential framework for assessing the global economic outlook and take away an actual investment checklist.

1) Why ‘Abenomics 2.0’ Is Inevitable: 7 Structural Reasons

1. The paradox of ultra-high debt and interest rate sensitivity.
Japan’s general government debt-to-GDP ratio is the highest in the world, and the average duration of JGBs is long. Even a 1 percentage point increase in the policy rate would exponentially increase interest expenses over the mid-to-long term.
Fiscal dominance constrains monetary policy, structurally delaying any rate hikes.

2. Financial stability risks.
The evaluation loss risks of JGBs for domestic banks and insurers rapidly expand during a steep rise in rates.
The BOJ is compelled to prefer yield curve control (YCC flexibility) and differentiated responses to short- and long-term rates over hiking interest rates.

3. The socio-political economics of asset inflation felt by the public.
Following the NISA reform, individual direct investment surged, and stock market rallies directly translate into higher approval ratings.
Withdrawal of liquidity would in turn lead to adverse asset effects and political costs.

4. Pressure to improve TSE’s PBR below 1 and the boom in share buybacks.
Governance reform forces corporations to recycle their cash into the capital market, aligning stock support and liquidity expansion with policy objectives.

5. Exchange rate pass-through for an energy-importing country.
A weak yen pushes up import prices, but the structural energy dependency is difficult to change in the short term.
Thus, managing a gradual yen weakness along with subsidies and tax adjustments is more realistic than a rapid exchange rate jump.

6. The “market infrastructure” role of the BOJ and GPIF.
The BOJ holds an overwhelming majority of listed ETFs, while the GPIF is a major shareholder in large-cap companies.
A massive sell-off would shock both corporate governance and market stability.
Consequently, the choice is limited to maintaining the holdings or adopting a gradual taper rather than selling off.

7. Global chain conditions.
Amid the US fiscal deficit and the growing net supply of US Treasuries, Japanese liquidity supports the demand for dollar assets.
From the perspective of alliance politics and the harmony of monetary policies, a rapid tightening is irrational.

2) The Actual Flow of Liquidity: Yen Carry Trades → Exchange Rates → Asset Prices

The flow follows the sequence of low-yen borrowing → conversion to dollars → inflow into US Treasuries, US stocks (especially in AI), and alternative assets.
The exchange rate moves on a weak yen (centered around USDJPY in the 150s), and as long as the interest rate differential is maintained, carry trade profits continue.
Domestically, NISA funds and corporate share buybacks provide a liquidity base for the stock market.
Bonds face a ceiling on rate rises due to the BOJ’s stabilization of demand, while stocks and alternative assets gain relative strength.

3) Global Ripple Effects: US Treasuries, AI Trend, Commodities

Supporting US Treasury demand.
In the wake of China’s reduction in holdings, Europe and Japan now play the role of a counterbalance.
Additional liquidity from Japan indirectly fills the demand for US Treasuries.

Reinforcing the AI trend.
Yen carry trades and global liquidity focus on US AI megacaps and the semiconductor equipment chain.
Domestically in Japan, beneficiaries emerge in high value-added supply chains such as Tokyo Electron, Advantest, SCREEN, Murata, Sony, Renesas, and Nikdek.

Commodities and gold.
If global inflation expectations rise modestly, a structural bid may form for gold and some commodities.
This is a typical feature of an ‘asset inflation’ phase that runs parallel to the stock market rally.

4) Key Mechanisms Rarely Addressed Elsewhere

The real constraint on the BOJ’s ETF exit strategy is “corporate governance.”
The high shareholding of the BOJ and public pension funds affects not just prices but also the voting rights structure and management stability of companies.
Thus, the BOJ prefers non-sale exit strategies such as swaps, transfers, or repurchase agreements that assume long-term holding over outright sales.

The NISA reform is not a one-off event but a cash flow mechanism with a “permanent limit.”
Tax incentives cause individuals to engage in cyclical net buying for an extended period.
This provides a micro-level liquidity supply mechanism stronger than interest rate hikes.

YCC 2.0 is different from interest rate increases.
Band expansion and operational flexibility focus on managing “volatility” rather than “price.”
This approach absorbs the duration risks of banks while avoiding genuine tightening.

5) Risk Scenarios and Leading Indicator Checklist

Risk Scenario A: Wage-price reinforcement.
If wage growth in Chun-Tu remains in the 5% range for two consecutive years, core inflation may overshoot to the higher end, increasing pressure for the BOJ to normalize policy.

Risk Scenario B: A surge in energy prices and an exchange rate shock.
A combination of soaring oil prices and further yen weakening would significantly impact import prices.
It would be difficult to withstand without fiscal support.

Risk Scenario C: A global contraction in dollar liquidity.
If US Treasuries soar while the dollar strengthens simultaneously, an unwind of carry trades would occur.

Checklist.
– If the USDJPY exceeds 155, check for signals of intervention by the Ministry of Finance and the option expiry positions.
– When the 10-year JGB surpasses the 1.5% mark, pay attention to changes in the BOJ’s frequency of unscheduled purchases.
– Monitor the BOJ’s weekly balance sheet, ETF net buying pace, and GPIF’s quarterly rebalancing disclosures.
– Track the trend in the proportion of TSE PBR <1 stocks and announcements of share buybacks.
– Monitor the guidance on US AI capital expenditure and the backlog in semiconductor equipment.

6) Investment Perspective: Strategic Framing and Ideas (Not Advice)

Framing.
In an environment of “moderate inflation + limited interest rate hikes + abundant liquidity,” a higher allocation to growth stocks, quality tech, and large-cap stocks with strong cash flow is advantageous.
Hedging exchange rate risk should be based on a comparison between hedging costs and expected returns.

Idea Map.
– Japan: Beneficiary stocks from governance reforms (companies that consistently repurchase shares), manufacturing and parts companies with high potential for PBR improvement, and segments within the semiconductor equipment chain.
– Global: Strategic diversification into US AI infrastructure (semiconductors, HBM, equipment, power), dividend growth stocks with strong cash flow, and a balance of gold and high-quality resources.
– Bonds: Divide duration, focus on high-quality credits, and keep in mind the correlation between US Treasuries and yen cash.

7) Fact Check and Summary of Issues

Gold Prices.
Although gold has recently reached record highs repeatedly, the $4,000 level is not considered a general consensus.
The gold rally is best viewed as a combination of hedging against inflation and expectations of renewed liquidity supply.

BOJ’s Stock and ETF Holdings.
The BOJ holds the vast majority of Japanese ETFs and indirectly owns a significant share of the market capitalization of Japanese stocks.
However, figures such as “10% ownership of Japanese stocks” should be interpreted as a range rather than a precise number, as they vary by timing and calculation method.

Yen Exchange Rate.
The USDJPY has repeatedly touched the 150s in recent years.
A practical approach is to consider both the potential intervention zone and market positioning.

8) Conclusion: The Core of Abenomics 2.0 Is “Sustainability Over Speed”

Japan’s choices lean towards sustaining liquidity supply rather than raising rates.
This outcome is the result of a convergence among fiscal, financial stability, and socio-political factors.
Consequently, the exchange rate is likely to exhibit a gradual yen weakness, the stock market will face structural bids, and globally there will be a preference for risk assets centered on AI.
However, if second-round effects from wages and prices, energy variables, or stresses in the US Treasury market intensify, a moderation in pace will be essential.
The key lies not in events but in sustainability.
Asset inflation could be extended once more until the direction of liquidity changes.

< Summary >

Japan is likely to choose liquidity supply over rate hikes due to the convergence of debt, financial stability, and socio-political factors.
Yen carry trades provide support for the US AI-centered stock market and alternative assets, indirectly bolstering US Treasury demand.
The BOJ and public pension funds’ ETF holdings are constrained by corporate governance, making “maintaining holdings” the default exit strategy.
Risks include wage-price reinforcement, shocks from energy or exchange rate movements, and a contraction in dollar liquidity; key indicators to monitor are USDJPY at 155, 10-year JGB at 1.5%, and changes in the BOJ’s balance sheet.

[Related Articles…]
NISA Reform Triggering Massive Domestic Fund Movement and Long-Term Bid in the Japanese Stock Market
The Practical Impact of Yen Carry Trades on the US AI Rally and Managing Exchange Rate Risks

*Source: [ Jun’s economy lab ]

– 아베노믹스를 부활할 수 밖에 없는 일본의 신임총리

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