US-Japan Trade Deal Hinges On Fund That Remains A Puzzle

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Core consumer inflation in Japan's capital stayed well above the central bank's 2% target in July, data showed on Friday, adding to renewed market expectations for another interest rate hike this year.

The data will be among factors the Bank of Japan will scrutinise at its next rate review on July 30-31, when the board is expected to revise up this fiscal year's inflation forecast in a quarterly review of its projections.

The Tokyo consumer price index (CPI), which excludes volatile fresh food costs, rose 2.9% in July from a year earlier, government data showed, slightly below a median market forecast for a 3.0% increase. It followed a 3.1% rise in June.

A separate index for Tokyo that strips away both fresh food and fuel costs - closely watched by the BOJ as a measure of domestic demand-driven prices - rose 3.1% in July from a year earlier after a 3.1% gain in June, the data showed.

The BOJ exited a decade-long, radical stimulus programme last year and raised short-term interest rates to 0.5% in January on the view Japan was on the cusp of sustainably hitting its 2% inflation target.

While the central bank has signalled readiness to raise rates further, the economic impact of higher U.S. tariffs forced it to cut its growth forecasts in May and complicated decisions around the timing of the next rate increase.

But U.S. President Donald Trump's surprise announcement on Wednesday of a trade deal with Japan has diminished uncertainty over the country's economic outlook, prodding some investors to renew their bets on another rate hike by the end of this year.

Hours after the announcement, BOJ Deputy Governor Shinichi Uchida said the deal would reduce uncertainty and heighten the chance of Japan durably hitting the bank's inflation target.

A Reuters poll, taken before the trade deal announcement, showed a majority of economists expect the BOJ to raise its key interest rate again by year-end, though most expect the bank to stand pat at this month's meeting.

Source: TradingView

Understanding the Crypto Fear & Greed Index: What Does it Really Measure?

The Crypto Fear & Greed Index, provided by software development platform Alternative, is far more than just a number; it’s a comprehensive sentiment indicator. Ranging from 0 to 100, where 0 signifies “Extreme Fear” and 100 indicates “Extreme Greed,” this index aims to distill the complex emotional landscape of the crypto market into a single, easily digestible figure. Its core philosophy is rooted in the idea that excessive fear can drive down prices, creating buying opportunities, while irrational exuberance (greed) can lead to market bubbles, signaling potential corrections. Think of it as a temperature gauge for investor psychology.

But how does it arrive at this number? The index doesn’t rely on a single data point. Instead, it aggregates data from six distinct market factors, each weighted to contribute to the final score:

Each of these factors contributes to painting a holistic picture of the market’s emotional state, making the Crypto Fear & Greed Index a powerful tool for discerning underlying trends.

Navigating the “Greed” Zone: What Does a Score of 70 Imply?

A reading of 70 on the Crypto Fear & Greed Index places the market firmly in the “Greed” zone. This doesn’t necessarily mean an immediate crash is imminent, but it does suggest that investors are feeling optimistic, perhaps even overly confident. Historically, periods of extreme greed have often preceded market corrections, as asset prices become inflated beyond their fundamental value due to speculative buying. The adage, “Be fearful when others are greedy, and greedy when others are fearful,” often comes to mind here.

The fact that the index fell slightly from 71 to 70 while remaining in ‘Greed’ suggests a minor softening of sentiment, but not a dramatic shift. It implies that while some of the froth might be coming off, the overall market mood remains buoyant. For astute investors, this ‘Greed’ signal serves as a prompt for caution. It encourages a review of portfolios, a potential de-risking strategy, or at least a heightened awareness of the potential for increased volatility.

How Can Investors Strategically Use the Crypto Fear & Greed Index?

The Crypto Fear & Greed Index is more than just an interesting statistic; it’s an actionable tool for informed decision-making. Here’s how various types of investors can integrate it into their strategies:

It’s important to remember that the index is a guide, not a definitive predictor. It works best when combined with fundamental analysis, technical analysis, and a clear understanding of your own risk tolerance.

The Limitations and Nuances of the Crypto Fear & Greed Index

While incredibly useful, the Crypto Fear & Greed Index is not without its limitations. It’s a snapshot of market sentiment, not a crystal ball. Here are a few things to keep in mind:

Understanding these nuances ensures you use the index as a complementary tool rather than a sole determinant of your investment strategy.

Historical Insights: When Has the Crypto Fear & Greed Index Told a Story?

Looking back at its history, the Crypto Fear & Greed Index has often provided compelling insights during pivotal market moments. For instance, during major market crashes, such as the one in May 2021 or the FTX collapse in late 2022, the index plummeted into “Extreme Fear,” often reaching single digits. These periods, though terrifying for many, retrospectively presented significant buying opportunities for those brave enough to “be greedy when others are fearful.”

Conversely, during euphoric bull runs, the index has consistently lingered in “Extreme Greed,” sometimes for extended periods. The peak of the 2021 bull market saw the index hovering in the 80s and 90s, signaling an overheated market that eventually led to corrections. These historical patterns underscore the index’s utility in identifying potential turning points driven by collective investor psychology.

Conclusion: Mastering Market Emotions with the Crypto Fear & Greed Index

The Crypto Fear & Greed Index remains a powerful and insightful tool for anyone navigating the dynamic world of cryptocurrencies. By distilling complex market dynamics into a simple numerical value, it offers a window into the collective emotional state of investors. Its current reading of 70, firmly in the ‘Greed’ zone, serves as a gentle reminder to exercise caution and consider a balanced approach to your investments. While it’s not a crystal ball, understanding the components and implications of this index can significantly enhance your ability to make more informed, less emotionally driven decisions. Combine it with your own research and a solid investment strategy, and you’ll be better equipped to ride the waves of crypto market sentiment.

Frequently Asked Questions (FAQs)

1. What does a high score on the Crypto Fear & Greed Index mean?A high score (e.g., above 75, indicating “Extreme Greed”) suggests that investors are feeling overly optimistic and the market might be overheated. Historically, such periods can precede market corrections, making it a time for caution.

2. What does a low score on the Crypto Fear & Greed Index mean?A low score (e.g., below 25, indicating “Extreme Fear”) suggests that investors are panicking and selling off assets. This often creates potential buying opportunities for contrarian investors, as assets might be undervalued.

3. How often is the Crypto Fear & Greed Index updated?The index is typically updated daily, providing a fresh perspective on market sentiment each day. This allows investors to track short-term shifts in market psychology.

4. Can I rely solely on the Crypto Fear & Greed Index for investment decisions?No, it is not recommended to rely solely on the Crypto Fear & Greed Index. While it’s a valuable sentiment indicator, it should be used in conjunction with fundamental analysis, technical analysis, and an understanding of broader macroeconomic factors and your personal financial goals.

5. Why are surveys currently paused in the Crypto Fear & Greed Index?The provided information states that surveys are currently paused. The exact reason isn’t specified, but it could be due to operational reasons, data collection methodology adjustments, or a temporary suspension of that specific data input.

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Source: CryptoSlate

Yet beneath the surface of weak GDP figures and softening trade data lies a more complicated and paradoxical reality. Japan continues to maintain near-full employment, stable domestic consumption, and world-class infrastructure, all while carrying the highest public debt-to-GDP ratio in the developed world. Its rural economy is quietly innovating, and major firms are adapting supply chains for resilience rather than efficiency.

The question confronting policymakers, businesses, and global investors alike extends beyond the question of growth to the question of whether it can reorient the country’s future before a tipping point is reached.

For every member of the National Diet, the current talk of the day is how to handle the trade headwinds and tariff tensions with the United States. Japan’s exports have now declined for two consecutive months, with June’s drop driven largely by weakened semiconductor and auto shipments to China and the U.S. Washington’s threatened 35 percent tariffs on Japanese imports could tip the economy into a technical recession. This sent the Japanese government scrambling to hold high-level talks in Washington ahead of the August 1 deadline, resulting in a last-minute deal, announced on July 22, that will see the tariff rate lowered to 15 percent – including for Japanese automotive exports. Yet this outcome can’t hide the reality that Japan’s reliance on global exports is again proving to be a vulnerability. The United States remains Japan’s most important trade partner, leaving Tokyo dependent on an increasingly volatile U.S. administration.

Underneath these immediate trade tensions is the persistent issue of government debt. Japan’s public debt now stands at over 260 percent of GDP, the highest among developed nations. Despite this, bond yields remain remarkably low, and the country continues to finance its massive spending domestically. How long this can last, however, is unclear. Inflation remains above the Bank of Japan’s 2 percent target, wages have only modestly increased, and social spending pressures, particularly from an aging population, are intensifying. A recent Deloitte analysis highlighted how a strong yen, combined with cautious consumer spending, is squeezing corporate margins. The yen’s appreciation has helped tame import costs and rein in inflation, but at the same time, domestic consumers remain hesitant, dampening firms’ ability to pass on costs or foster volume growth.

With these challenges confronting Japan in both the short and long term, policymakers are beginning to pivot toward “economic security.” This includes, for example, reducing reliance on single-source suppliers, especially from China, and investing more in semiconductors, batteries, and hydrogen. This marks a major shift from past decades, when Japan heavily outsourced manufacturing to reduce costs. The World Economic Forum also highlighted a grassroots dimension to this strategy, showcasing how rural areas are leveraging traditional practices and renewable energy to build local resilience. For example, some prefectures are powering microgrids through biomass and geothermal power projects rooted in centuries-old forest management techniques. With these types of investments and innovations, Japan has demonstrated the know-how to maintain a technological edge over its rivals.

While the government continues to pursue measures to stimulate domestic growth and address foreign trade issues, redefining economic success in Japan will require addressing its demographic realities. With 29.3 percent of the population over age 65, Japan faces both a labor shortage and a narrowing tax base. For the United States, a sinking birth rate barely makes headlines due to the large influx of immigrants each year. For Japan, however, accepting foreigners into the country comes with immense challenges. Sanseito, for example, enjoyed its best-ever showing in the July 20 upper house election on a platform of opposition to what it described as a “silent invasion” of immigrants. Even tourism has become a sticking point: the government has established a national body to rein in overtourism after a record-breaking 36.8 million tourists came to Japan in 2024.

Animosity toward foreigners is only one side of the coin of Japan’s demographic crisis. With a birthrate of 1.15 in 2024, Japan entered its 18th consecutive year of deaths outpacing births, with a population drop of nearly a million people. This population decline is closely tied to Japan’s entrenched work culture, which continues to discourage family formation and work-life balance. Add to that the phenomenon of “nominication,” company-sponsored after-work drinking parties meant to strengthen team bonds, which remain a key part of corporate life. While intended to foster workplace cohesion, these gatherings often reinforce work-first priorities and eat into personal time, making parenthood feel like an increasingly difficult choice for many young professionals.

Meanwhile, another trend offers an illustration of changing attitudes: younger workers are now hiring “resignation agencies” to quit their jobs for them, paying about $350 to bypass the anxiety and discomfort of direct confrontation with their bosses. These resignations are often driven by harassment, unpaid overtime, or inflexible workplace expectations.

The real question now becomes: will there be a tipping point for Japan? This will come when demographic decline and fiscal strain begin to feed on each other, setting off financial instability or other social problems.

On the financial front, the recent bond market data is worrying: yields on Japan’s 10‑year government bonds recently hit their highest levels since 2008 at around 1.59 percent, while 30‑year bonds soared to 3.21 percent, reflecting investors’ growing concern over potentially unsustainable debt levels. Even the typically stable auctions for long-term bonds are now failing to find buyers: the 20‑year bond auction recorded its weakest demand since 2012, signaling a dangerous erosion of investor confidence. Should global conditions tighten, say via a U.S. rate spike or tariff shock, Japan could face a debt sell-off that forces either painful fiscal adjustments or, worst-case, a credit rating downgrade, diminishing the government’s ability to roll over its debt. Economists warn such a downgrade could push Japan toward default.

A further collapse in workforce numbers, paired with shrinking consumer demand, risks a vicious cycle of lower tax revenues, higher debt-servicing costs, and reduced capacity to invest in innovation. In that scenario, societal confidence, measured through voter turnout, trust in institutions, or the stability of public services, could erode, marking a true crisis for Japan’s social contract.

Source: The Diplomat

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On July 25th, President Trump visited the Federal Reserve in Washington, D.C., marking the first presidential visit in nearly two decades, and emphasized the need for lower interest rates.

The visit highlights ongoing tensions between Trump and Fed Chairman Powell, potentially impacting future Federal Reserve interest rate decisions.

Trump Urges Rate Cut Amidst Budget Overrun Critique

President Trump visited the Federal Reserve headquarters and urged Chairman Powell to consider a rate cut. Highlighting the $2.5 billion renovation costs, Trump criticized budget overruns. "I would fire a project manager who goes over budget." The interaction between both leaders underscores ongoing tensions at the institution.

Trump's call for an interest rate cut has reignited debates about the Fed's policy direction. Akin to previous encounters, Trump's remarks put pressure on Powell, potentially influencing upcoming monetary decisions. Such public exchanges highlight the intersection of political and financial policy during Trump's tenure.

Reactions to Trump's visit were notable, with Powell maintaining restraint despite Trump's demands. Powell assured continuous evaluation of economic conditions before deciding on any rate changes. The event has left financial markets speculating about future Fed meetings and policy adjustments.

Source: CryptoSlate

Israel and the United States recalled their delegations from Gaza ceasefire talks for consultations on Thursday, with U.S. envoy Steve Witkoff accusing the Palestinian militant group Hamas of failing to act in good faith in the talks.

"While the mediators have made a great effort, Hamas does not appear to be coordinated or acting in good faith. We will now consider alternative options to bring the hostages home and try to create a more stable environment for the people of Gaza," Witkoff said in a statement on X.

Both Israel and Hamas are facing pressure at home and abroad to reach a deal following almost two years of war, with the humanitarian situation inside Gaza deteriorating sharply and Israelis worried about the conditions in which remaining hostages are being held.

An Israeli official with knowledge of the talks said the answer presented by Hamas to the most recent ceasefire proposal "does not allow for progress without a concession" by the group but that Israel intended to continue discussions.

Mediators have been seeking to clinch an agreement that would secure a ceasefire and the release of hostages still held by Hamas in the Gaza Strip.

Dozens of people have starved to death in Gaza the last few weeks as a wave of hunger crashes on the Palestinian enclave, according to local health authorities.

Source: Reuters

Polysilicon prices are up 68% after local media reported that the two biggest producers were preparing to buy up smaller rivals and consolidate the sector.

Source: Reuters