Synopsis

Listen to Japan | Market Musings, August 2026

Japanese bond yields are rising and the Yen is weakening — and in this month's note, our CIO P. Krishnan argues this is far more consequential than it appears. For decades, Japan was the world's cheapest source of capital: near-zero yields that anchored the global carry trade and funded everything from India's infrastructure to its equity markets, with the marginal Japanese investor famously agnostic to price. That floor has now shifted, and the move is seismic.

Through a connected series of charts — global bond yields, the Yen's thirty-year breach, an unprecedented US intervention to defend it, and India's own external accounts — the note builds to one conclusion: the global cost of capital has structurally re-rated higher, and is unlikely to walk back. Indian equities, long flattered by cheap global liquidity, cannot assume their premium valuations are theirs to set.

The silver lining? In a world where capital turns far more discerning, businesses with real access to capital, capital discipline, and resilience will stand apart. Finding them — at a sensible price — is the task ahead.