More - And Less - Of The Same Things

By Michael Every of Rabobank

It’s more of the same to start this Tuesday, and less too: and that isn’t good news.

Japanese Q2 GDP came in at 0.4% q-o-q, 1.3% y-o-y at the second read, backing the BOJ hiking rates again on September 18 – but is it really going to be ‘one and done’? The 2-year JGB yield is at 1.84% today, close to a new multi-decade high, and vs. the more usual 0% seen for years, while the 10-year is at 2.91%, off recent highs.

Alongside suspicions of further FX market intervention, USD/JPY swung from 154.37 to 153.21, with market chatter of a test of 152 next: recall it was at 160.35 at the start of the month. That’s quite the volatility shock for some books and for those who thought the Yen Carry trade was going to stay one way even after the recent warning from Bessent. Finance Minister Katayama said she will maintain an orderly currency market: but following whose order(s)?

The US and Canada return from a long weekend to a trade war. Trump is threatening to ban US sales of Bombardier’s Canadian-built jets unless production moves south of the border; Canada is set to impose counter tariffs. Showing the direction of travel, the press announced Canada had resumed defense talks with China after an eight-year hiatus, which as one Korean paper puts it, “reflects [an] effort to diversify partnerships amid strained US relations and defence procurement shifts.” How would that work with NATO and the EU unless the latter is dominated by a Germany run by the pro-Beijing AfD? The symbolism, and stakes, matter far more than that benign action, but as the FT argues, Canada “is fated” to keep trying to strike a better deal with the US.

Oil is close to $100 as the Financial Times quotes traders that attacks on shipping and eroding inventories mean “something has to break” soon, and Qatar warned of an “industrial catastrophe” if this crisis continues – and in logistics, things can go non-linear. US diesel is already at a record high, and the Middle East press reports bunker fuel for ships is running out in some places. Tellingly, Japanese shipping companies are considering a return to sails and kites to cut fuel consumption. That fits given Letters of Marque are a thing again now.

Meanwhile, the Houthis struck Saudi Aramco facilities; the UN envoy warned of a wider conflict in Yemen; Israel hit Hezbollah after ceasefire violations; the IAEA’s Grossi said the inspecting body is “completely blind” on Iran’s nuke program; and Iran floated a Hormuz exclusion zone with Oman “in days”, as the Wall Street Journal claims its oil dollars are gone, plunging it “into crisis – and pushing it to escalate. Markets are starting to accept that disruption is going to linger well into 2027. The question is how much worse things could get as well as better.

In Russia, Trump’s peace envoys reportedly found that Putin was still unwilling to compromise on Ukraine, which is little surprise, despite their official statement that there was “movement” towards three-way talks, as Zelenskyy stated the US wants to explore Russia-Ukraine winter de-escalation steps – like stopping attacks on oil refineries(?) That’s as the EU is urging the UK, Canada, Japan, and Norway to “step up to the plate” on funding Ukraine as Kyiv faces a $27bn budget gap in 2026, as it puts €200m into Greenland to try to counter Trump’s approach - but protecting that territory from all interested parties will take many multiples of that sum annually. For its part, Russia just opened a road to North Korea border, showing how they are working more closely together.

In geoeconomics, China's Huawei goes to trial in the US over sanctions and trade secrets eight years after the first allegations were made against it, as Brussels floated an EU ‘anti-China’ procurement rule where national capitals would be urged (is urging a rule?) to reduce their “strategic dependence” on Beijing when issuing public contracts. At the same time, Germany is reportedly worried that France’s Palantir rival risks creating a new dependency for it – on Paris.

Chinese export growth was a staggering 25% y-o-y in US dollar terms while imports were up 28.2%. The trade surplus rose again to a new record high of CNY809.3bn, up 11.9% y-o-y. We will have to wait to parse the detailed China-EU trade numbers ahead of the looming European decision on whether to start Trump-style trade protections vs. Beijing.

On top of all that, Trump posted a slew of messages, including: the ‘moon is ours’, meaning American; of himself in a spaceship; and of what claim to be proposed designs of a new Space Force uniform based on those from the 1997 movie ‘Starship Troopers’...

pic.twitter.com/uYM6I1IBTD

— Rapid Response 47 (@RapidResponse47) September 6, 2026

... which were based on those of the Wehrmacht, SS, and Gestapo as a more-is-more satire: the new look certainly smacks of Grand Moff Tarkin as much as Grand Macro Strategy.