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Nomura's Rob Subbaraman says Japan's bond market is “flashing warning signs” as Prime Minister Sanae Takaichi pursues fiscal stimulus aimed at lifting nominal growth. He says rising borrowing costs could threaten that strategy, while largely cost-driven inflation complicates the Bank of Japan's tightening path.

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Japanese retail investors are betting that ​recent gains in the yen will be short-lived, maintaining significant short positions that could ‌increase volatility in currency markets.

Most respondents expect the BOJ to hike this week by 25 basis points, citing higher inflation, higher wages, and pressure from the U.S. government.  A hike would signal an acceleration of the tightening cycle, faster than the six-month interval the Bank has been following.

Asian stocks diverged on Tuesday as South Korea's KOSPI struggled to shake off pressure on semiconductor shares while Japan's Nikkei 225 recovered, leaving the region's two most AI-sensitive markets moving in opposite directions ahead of key US and Japanese rate decisions. The KOSPI fell as much as 0.76% in early Seoul trading before paring most of the decline, extending a difficult stretch after Monday's sharp…