The Macro Minute: Will Japan force the Fed to Ctrl+P?

Happy Monday out there, team 42. It's your skipper here at Darius Dale, to present our macro minute for Monday, August 3rd, 2026. Hope everyone had a great weekend. So, as always, we'll start with the executive summary from today's lead-off morning note, so let's dive right in. Today's key macro question is, will Japan force the Fed to

control P, print? The short answer is yes, it already has, and it will likely continue to do so in increasing quantities over the long term, amid Prime Minister Sanae Takaichi's aggressive reflation agenda. The prospect of a larger, more lasting allocation shift by Japanese capital allocators out of the US Treasury market and back into the JGB market represents

a structural risk to the marketable Treasury securities asset class, something we have been warning about for over 3 years, since we first published our Investing in a New Normal Turning Regime analysis in the summer of 2023. It is in US policymakers' interest to convince their Japanese creditors to delay this inevitable outcome. While

expanding usage of the Fed's FEMA repo facility buys them time, it does signal an erosion of Fed independence, because the Fed is choosing to debase the US dollar in a controlled manner to comply with the Treasury Department's desire to avoid foreign investors dumping US dollar-denominated assets in the open market in an uncontrolled manner, akin

to what we saw in March of 2020. So, um, obviously we we we we did a deep dive on all these dynamics in today's lead-off morning note, particularly from the perspective of the global dollar res- cycle, you know, the global credit growth, uh, I'm sorry, global global savings growth, and and also how that's