{"slug": "japan-faces-a-tough-inflation-growth-trade-off-and-its-not-alone", "title": "Japan faces a tough inflation-growth trade-off – and it’s not alone", "summary": "Japan's economy grew at a much weaker-than-expected annualised rate of 1.1% in the second quarter, complicating the Bank of Japan's efforts to raise interest rates and fight inflation, according to a report by Nicholas Spiro of Lauressa Advisory. The report notes that global bond markets are nervous, with 30-year US Treasury yields hitting 5.3% on August 17, the highest since 2007, partly due to tech companies' AI-driven debt issuance and central banks' reluctance to tighten policy. Citadel Securities' Nohshad Shah said policymakers' failure to address long-term debt issues keeps yields high.", "body_md": "Advertisement\n\nMacroscope\n\n# Japan faces a tough inflation-growth trade-off – and it’s not alone\n\nBond markets are nervous about central banks’ ability to contain inflation as South Korea, Indonesia and the Philippines face similar pressures\n\n3-MIN READ3-MIN\n\n1\n\nListen\n\nNicholas Spiro is a partner at Lauressa Advisory, a specialist London-based real estate and macroeconomic advisory firm.\n\nGlobal bond markets are throwing a tantrum. On August 17, the yield on 30-year US Treasury bonds hit 5.3 per cent, its highest level since 2007 and up from 4.8 per cent as recently as June 29. The average yield on long-term debt across the Group of 7 advanced economies is the highest since 2008.\n\nSeveral factors are at play. One of them is the surge in longer-dated debt issued by leading technology companies as they ramp up capital spending on artificial intelligence (AI),\n\n[especially data centres](https://amp.scmp.com/tech/big-tech/article/3364341/nvidia-provide-us105-billion-guarantee-openais-ohio-data-centre). Another factor is mounting concern about governments’ ballooning public debts, exacerbated by the extra spending to protect households and businesses from the impact of the energy shock from the US-Israel war against Iran.However, the political and economic constraints to tightening monetary policy are more consequential. In a report on August 17, Citadel Securities said the US Federal Reserve’s\n\n[reluctance to raise interest rates](https://www.scmp.com/news/world/united-states-canada/article/3362310/us-federal-reserve-holds-interest-rates-steady-despite-warshs-inflation-vow?module=inline&pgtype=article)despite a prolonged period of above-target inflation and the enduring resilience of the US economy is the key factor driving up yields on long-dated debt.“The inability of policymakers to make progress on fixing the roof while the sun is shining is a key reason [long-term bond yields] remain so stubbornly high. So long as this persists, it will remain a risk for markets more broadly,” said Nohshad Shah at Citadel Securities.\n\nIn some Asian economies, there is much less sunshine. The publication of data on August 17 showing Japan’s economy grew by a much weaker-than-expected 1.1 per cent in annualised terms in the second quarter could not come at a worse time for\n\n[the country’s central bank](https://www.scmp.com/opinion/asia-opinion/article/3351088/why-japans-central-bank-caught-between-rock-and-hard-place?module=inline&pgtype=article), which is under intense pressure to raise interest rates more sharply to bolster its inflation-fighting credibility.Although\n\n[the surprise joint intervention](https://www.scmp.com/economy/global-economy/article/3362771/us-has-helped-pull-japans-yen-out-40-year-low-why?module=inline&pgtype=article)in the currency markets by the United States and Japan on July 30 and 31 has so far done little to strengthen the yen, it has caused investors to price in a faster pace of interest rate increases. Bond markets are assigning an 80 per cent probability to a rise in Japanese borrowing costs next month, up from around 25 per cent before the intervention.Advertisement\n\nSelect Voice\n\nSelect Speed\n\n1.00x", "url": "https://wpnews.pro/news/japan-faces-a-tough-inflation-growth-trade-off-and-its-not-alone", "canonical_source": "https://www.scmp.com/opinion/asia-opinion/article/3364632/japan-faces-tough-inflation-growth-trade-and-its-not-alone?utm_source=rss_feed", "published_at": "2026-08-20 08:30:07+00:00", "updated_at": "2026-08-20 08:44:19.033020+00:00", "lang": "en", "topics": ["artificial-intelligence"], "entities": ["Bank of Japan", "Citadel Securities", "Nohshad Shah", "Nicholas Spiro", "Lauressa Advisory", "US Federal Reserve", "US Treasury"], "alternates": {"html": "https://wpnews.pro/news/japan-faces-a-tough-inflation-growth-trade-off-and-its-not-alone", "markdown": "https://wpnews.pro/news/japan-faces-a-tough-inflation-growth-trade-off-and-its-not-alone.md", "text": "https://wpnews.pro/news/japan-faces-a-tough-inflation-growth-trade-off-and-its-not-alone.txt", "jsonld": "https://wpnews.pro/news/japan-faces-a-tough-inflation-growth-trade-off-and-its-not-alone.jsonld"}}