Japan can choose to save either the bond market or currency, but not both: Asset Manager

• The physical energy supply shock is underpriced, with potential for non-linear price spikes in oil (e.g., over $150).
• Japan is identified as the most vulnerable major economy to the energy shock and yen weakness, facing a dilemma for the Bank of Japan.
• The BOJ may be forced to hike rates if the oil supply shock and yen weakness persist, potentially leading to a non-linear move in USD/JPY above 160, challenging the bond market.

Nick Ferres discusses the underpriced physical energy supply shock and its potential for non-linear price spikes, warning of significant inflation and interest rate volatility. He highlights Japan as a critical weak link, facing a policy dilemma where the Bank of Japan may be forced to choose between saving the bond market or the currency amidst persistent oil supply shock and yen weakness.