THIS WEEK’S STORY
The numbers say boom, but the undercurrents show otherwise. Asia closed its best quarter in years, with the Nikkei up 38% and Korea’s KOSPI nearly doubling, while oil drifted back to pre-war prices and the dollar notched its fourth straight quarterly rise. But underneath sits a yen Tokyo won’t defend even past 1986 lows, a fresh China-Japan export control fight, and an EU-U.S. trade truce that finally takes effect after years of friction. The celebration and the warning signs are happening in the same week.
THE POWER MOVES
Asia closes its best quarter in years, but not everyone got the invite
Nikkei up 38%, KOSPI up nearly 71%, while Hong Kong’s Hang Seng dropped 7.5%
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Japan’s Nikkei and South Korea’s chip-driven KOSPI are heading into record territory, with Taiwan close behind on the same semiconductor wave. Foreign investors pulled a net $17.3 billion out of Korean equities even as the index soared, rebalancing away from concentrated tech rather than buying the story fresh. Hong Kong dragged through a 7.5% quarterly loss while its neighbors set records.
China widens its export control net to Japan
Twenty entities added, including Mitsubishi and Fujitsu subsidiaries, over remilitarisation concerns
Beijing added twenty Japanese entities to its export control list this week, citing concerns over Tokyo’s defence ambitions, including the Institute for Defence Studies and subsidiaries of Mitsubishi, Komatsu and Fujitsu. This follows the same move against American rare earth firms just last week. Beijing is treating export controls as its primary lever of pressure, deploying them against whichever country crosses its red lines, regardless of whether that country is an adversary or a longtime partner.
The EU’s tariff truce with Washington finally takes effect
Import duties on U.S. industrial goods drop from July 1, with the deal running through 2029
The European side of last year’s trade agreement with the U.S. formally comes into force this week, removing duties on a wide range of American industrial goods and extending preferential terms for U.S. farm products, including the lobster carve-out from Trump’s first term. The arrangement runs until 2029 and includes safeguards letting Brussels pull back if Washington breaks its end.
BETWEEN THE LINES
Tokyo is talking tough but acting slow
Yen hits 162.41, the weakest since 1986, with no intervention yet
Japan’s finance minister repeated the same script this week, saying authorities stand ready to act at any time. But the yen has broken through 162 with no intervention in sight, and traders are reading the silence as a signal in itself. Some strategists believe Tokyo’s tolerance has simply shifted higher. Others think intervention is still coming, just later and worse, somewhere between 163 and 165.
The index went up, the smart money went out
Net $17.3 billion left Korean equities this year even as the index nearly doubled
The strangest detail of this record quarter is who actually made money. Strong performance across Asia’s chip-heavy markets pushed up index weightings so much that foreign investors ended up selling into the rally just to stay balanced. Investors are increasingly looking past tech concentration toward defence and renewables for the diversification this quarter’s flows suggest they have been missing
Egypt’s economy holds steady through someone else’s war
IMF deal unlocks $1.6 billion as inflation stays elevated near 15%
Egypt kept its economy relatively contained through the worst of the Middle East conflict, helped by fast moves on fuel and electricity pricing and tighter spending. The IMF’s new agreement unlocks another $1.6 billion, bringing total disbursements close to $7.2 billion. Growth holds at a healthy 5%, but inflation near 15% shows the cost of that stability.
FORWARD INTELLIGENCE: The Week Ahead
U.S. jobs data, Thursday
With the dollar near a quarterly high and the yen at a 40-year low, this is the next major catalyst for both.
Yen intervention watch
Japan’s April 30 “final warning” still stands. Past 162, the question is whether Tokyo follows through or lets the line keep shifting.
China-Japan trade fallout
With twenty Japanese entities now on Beijing’s export list, watch whether Tokyo responds or absorbs it quietly given its own currency troubles.
Egypt’s IMF board approval
The $1.6 billion still needs board sign-off. Timing will signal how fast Cairo can actually access it.
