Trends We’re Tracking: Japan’s Deflation, Employee Activism, Chinese Lockdowns

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Japan – the only country welcoming inflation

The Japanese Yen plunged 12 percent against dollar so far this year and hit a 20 year low versus the greenback recently. While most other countries have started to or are planning to adopt tightening monetary policies in combatting surging inflation, Japan has retained its ultra-easing monetary policy. As a result, Japan’s 10-year government bond yield continues to be stuck in the narrow range of 0-0.25 percent, while government bond yields of most other countries are surging. The ever-increasing yield gap has sent the Japanese Yen tumbling against other currencies.
Japan has been stuck in deflation for decades. So much so that the price of its most iconic snacks, fried chicken and noodles (the equivalent of fast-food hamburgers in the U.S.), has not increased over the past 30 years. Along with lack of inflation, Japan has experienced sluggish economic growth over the past several decades and the Nikkei 225 Index (the equivalent of Dow Jones Industrial Average) is still 30 percent lower than its record high reached in December 1989, over 32 years ago. Japan has been trying very hard to combat deflation for decades but to no avail. The current global inflationary environment might be the best chance in decades for Japan to get out of its chronic deflation problem.1

Rising employee activism, again

For the last few years, employees have been playing a very active role by speaking out on issues of social significance. This rising wave of ‘employee activism’ was again in focus recently as companies like Disney acted to support this activism, while Apple and Starbucks seemed to take more aggressive measures to curb employees attempts at unionization.
In the case of Disney, taking a stance against Florida’s Parent’s Rights in Education legislation, resulted in conflict with lawmakers, which led to Florida Senate’s voting to revoke Disney World’s ‘special tax district’ designation. Disney CEO, Bob Chapek who initially declined to condemn the legislation, was forced to take a stand after employees undertook social media campaigns and staged walkouts.2 On the other end of the spectrum, friction with employee unions seems to be rising as we saw Apple working with lawyers to potentially resist unionization and Starbucks filing complaint with the U.S. National Labor Relations Board alleging unfair practices by labor organizers.3,4 
This increased employee activism is not only confined to U.S. companies, but it is proving to be a global phenomenon. Nestle and PepsiCo faced pushback from workers in Ukraine and Eastern Europe over the companies' response to Russia's invasion.5 While employee activism can bring in positive socio-economic changes within a company and its industry, executives also need to navigate the increased political risks associated with the same.

Global issues hit emerging economies especially hard

Geopolitical instability, rising inflation, and tighter financial conditions are top of mind for most global citizens, but these risks have been intensified for many emerging market economies. Not only have higher energy and food prices made things worse for nations already plagued by scarcity issues, but tighter monetary conditions at home have also increased the cost of U.S. dollar denominated debt repayments. This is particularly bad timing as indebtedness among the poorest countries has increased to near debilitating levels and sovereign debt exposure hits a 15-year high.
The unravelling of these issues recently hit Sri Lanka, which defaulted on its hard-currency government debt on April 12th after facing weeks of power cuts and long queues for food and gas. Without a concerted effort to limit the plethora of downside risks threatening nations across the world, Sri Lanka’s default may just be a harbinger of things to come.7,8 

Another month of pain in ‘bond land’ as central banks tighten up

April marked another month of rising yields and falling total returns in the fixed income markets as central banks pivoted toward or reiterated tighter monetary policy trajectories in response to persistent price increases. Unsurprisingly, there were few places to hide; the S&P/LSTA Leveraged Loan Index was up 22 basis points (bps) during April, while the FTSE 3-Month T-Bill Index returned 3 bps. Outside of these two segments, the results were grim. The Bloomberg U.S. TIPS Index returned -2.04 percent, while the Bloomberg U.S. Aggregate Index fell 3.79 percent. The relatively long-dated Bloomberg U.S. Corporate Bond Index lost 5.47 percent, bringing year-to-date losses through April to 12.73 percent - only slightly better than the S&P 500 Index’s -12.92 percent return.9,10 With so much open-ended uncertainty surrounding supply chains, geopolitics, and monetary conditions, volatility is likely to persist. However, for some institutional managers the bond market rout has made prevailing yields attractive enough to get off the sidelines.11

Lockdowns hit China hard

To battle rising cases of Omicron, China has instituted a zero-Covid policy. Strict lockdowns have all but shuttered cities including Shanghai, which is the country’s financial center and largest port. There is worry that the lockdowns could spread to Beijing, further hurting the economy. The lockdowns have caused concern that China may not be able to meet their annual growth target of 5.5 percent for the first time since their annual target was introduced in the 1990s.12

Cryptocurrency hacks

A USD stablecoin project was compromised this month, with hackers taking $182 million worth of digital assets, marking the fifth largest hack of a cryptocurrency project. This year’s rate of hacks are in line with last year’s total of $3.2 billion, as hackers target new protocols that may not have been fully audited or tested.13 Furthermore, the FBI, the Cybersecurity and Infrastructure Security Agency, and the U.S. Treasury Department issued a joint cybersecurity advisory, warning about North Korean hackers known as the Lazarus Group. This group was linked to last month’s exploit of Axie Infinity, where $600 million worth of digital assets were stolen.14

1. Gearoid Reidy and Daniel Moss, “The Reason Why Japan Won’t Break the Yen’s Fall,” Bloomberg Opinion, April 20, 2022,
2. Brook Barnes, “Disney to Lose Special Tax Status in Florida Amid ‘Don’t Say Gay’ Clash,” The New York Times, April 21, 2022,
3. Leslie Patton and Josh Eidelson, “Starbucks says it filed complaints against union with NLRB,” Bloomberg, April 20, 2022,
4. Zoe Schiffer, “Apple hires anti-union lawyers in escalating union fight,” The Verge, April 25, 2022,
5. “Oreo-maker Mondelez, Nestle, PepsiCo face pressure from European employees over Russia,” The Business Times, April 18, 2022,
6. Andrea Deghi, Fabio Natalucci and Mahvash S. Qureshi, “Emerging-Market Banks’ Government Debt Holdings Pose Financial Stability Risks, IMF Blog, April 18, 2022,
7. International Monetary Fund GLOBAL FINANCIAL STABILITY REPORT APRIL 2022,
8. “Are emerging economies on the verge of another “lost decade”?” The Economist, April 30, 2022,
9.Craig Torres, “Fed Dashes Cold Water on Shock-and-Awe Hike of 75 Basis Points”, Bloomberg, April 22, 2022,
10. Martin Arnold and Colby Smith, “ECB opens door to July rate rise while stressing contrast with US,” Financial Times, April 26, 2022,
11. Kate Duguid and Tommy Stubbington, “Historic sell-off lures bargain hunters to bond market,” Financial Times, April 21, 2022, 
12. Hudson Lockett, “Chinese stocks notch steepest monthly loss in 6 years as lockdowns hit growth,” Financial Times, April 26, 2022, 
13. Paul Vigna, “Crypto Thieves Get Bolder by the Heist, Stealing Record Amounts,” The Wall Street Journal, April 22, 2022,
14. Liam Tung, “FBI warning: These hackers are targeting developers and DevOps teams to break into crypto firms,” ZDNet, April 19, 2022,

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