Whilst the U.S. economy has not entered into recession yet, some strategists are arguing that the presence of an inverted yield curve can slowly induce an economic and stock price downturn.
But how will other markets react, and in particular Japanese equities?
Looking at past episodes of an inverted US Yield curve, the answer is not clear. With the impact on several core Japanese sectors - electric appliances, precision instruments, machinery, pharmaceuticals, automobiles & transportation equipment - being highly dependent on whether the Japanese Yen appreciates or depreciates. Which in turn is a function of the interest rate differential between the U.S. and Japan, and how the Bank Of Japan reacts.
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