COP17: Thirty Years of Hypocrisy & Scheduled Failure

The 17^th Conference of the Parties to the Convention on Biological Diversity concluded in Yerevan, Armenia, on 1st November 2026.  Critics described the outcome as a “bunch of baloney.”  That may be the most accurate scientific assessment the summit produced.  After thirty-one years of annual summits, communiqués, pledges, side events, and carbon-intensive flights to discuss carbon emissions, the world has arrived at the following position: emissions are at an all-time high, biodiversity targets are off-track, and the mechanism designed to fix both is structurally incapable of doing so.  Thirty-one years.  This is not a crisis of information.  This is a crisis of will.  The information exists.  The will is elsewhere.

The Scorecard of Failure

In 2022, nearly 200 countries signed the Kunming-Montreal Global Biodiversity Framework.  They committed to 23 targets by 2030: protecting 30 per cent of land and sea, mobilising US$200 billion annually in biodiversity finance, and sharing the benefits of genetic resources.  A UN report released on 15^th October 2026 — two weeks before the summit concluded — found that fewer than half of those targets are on track.

Global fossil CO₂ emissions reached 38.1 billion metric tons in 2025 — a new record, up 1.1 per cent from 2024, which was itself a record.  The world has warmed 1.4 degrees Celsius above pre-industrial levels.  The UN Environment Programme’s latest Emissions Gap Report says the world is on track for 2.6 degrees under full implementation of current pledges.  Under current policies, 2.8 degrees.  Any chance of holding to 1.5 degrees has, in the UN’s own words, been “lost.”  The remaining carbon budget for a 50 per cent chance of staying within 1.5 degrees will be exhausted within four years.  The next COP will be held before the budget runs out.  It will achieve as much as this one.

The United Nations Framework Convention on Climate Change has held annual summits since 1995.  COP1 was in Berlin.  COP3 produced the Kyoto Protocol, which the United States signed, then refused to ratify.  COP21 in Paris produced the Paris Agreement, celebrated as a historic breakthrough.  Global emissions have risen every year since Paris except 2020, when a pandemic shut the world economy.  The celebrated mechanism of the Paris Agreement is that countries submit their own targets — Nationally Determined Contributions — and then voluntarily try to meet them.  There is no enforcement mechanism.  There is no penalty for failure.  There is no independent verification.  There is, however, an enormous annual conference with significant carbon emissions from the flights of delegates travelling to discuss the problem of significant carbon emissions from flights.

COP28 in Dubai was hosted by the United Arab Emirates and presided over by Sultan Ahmed Al Jaber Al Falahi, Chief Executive Officer of the Abu Dhabi National Oil Company.  He opened the conference by suggesting that phasing out fossil fuels was not supported by science.  He later clarified his remarks.  Global oil production continued to rise.  Critics describe the consensus rule — under which a single country can stall or block an agreement — as the mechanism by which “one idiot” can hold 196 countries hostage.  This is an accurate description, not a rhetorical flourish.

The Canada Template

The anecdote that summarises this is Canada.  Canada ratified the Kyoto Protocol in 2002 and committed to reducing emissions to six per cent below 1990 levels by 2012.  By 2012, Canadian emissions were 18 per cent above 1990 levels.  Canada withdrew from Kyoto in 2011, citing the cost of compliance.  It then signed the Paris Agreement in 2016.  Canadian emissions have continued to rise.  This is not an anomaly.  This is the template.

Australia ratified Kyoto in 2007 and promptly began expanding its coal export industry — the largest in the world by 2019.  Japan signed the Paris Agreement and built sixty-five new coal-fired power plants between 2015 and 2023.  Germany, the self-declared leader of the green transition, restarted seventeen coal plants in 2022 when Russian gas was cut off.  Brazil signed every framework, ratified every protocol, and presided over the acceleration of Amazon deforestation under Jair Messias Bolsonaro Neto, with deforestation hitting 11,568 square kilometres in 2019 alone.  The pattern is not rare.  The pattern is the norm.

The Cost of Doing Nothing

The economic argument for climate action is not environmental sentiment.  It is self-interest, and the numbers are unambiguous.  Swiss Re, the global reinsurer, published its sigma study in 2021 projecting GDP losses by 2050 under four warming scenarios.  Under the worst scenario — no mitigating action, 3.2 degrees of warming — global GDP falls by 18 per cent.  Under the current policy trajectory, which puts warming at 2.6 degrees, the projected loss is 14 per cent of global GDP.  Even if every current pledge is fully delivered — which no serious analyst believes will happen — GDP falls by 11 per cent at 2 degrees.  Only the Paris Agreement target of below 2 degrees holds the loss to 4 per cent.

For China, the worst case is a 24 per cent GDP loss by 2050.  For the United States, Canada, and the United Kingdom, 10 per cent each.  For Europe, 11 per cent on average.  The Potsdam Institute for Climate Impact Research, in a study published in Nature in April 2024, calculated that CO₂ already in the atmosphere will cut global GDP by US$38 trillion annually by 2050 — nearly one-fifth — even if emissions are cut aggressively from today.  Under a high-emissions scenario, the average regional income loss rises to 60 per cent by the end of the century.  The damages are “locked in” from past emissions regardless of future action.

By 2050, McKinsey’s analysis projects US$2.8 trillion to US$4.7 trillion of Asian GDP at risk annually from lost outdoor working hours alone — not from crop failure, flooding, or infrastructure damage.  From heat.  Five hundred million to seven hundred million people in Bangladesh, India, and Pakistan alone could live where the annual probability of a lethal heat wave approaches 20 per cent.  These numbers are not projections designed to frighten voters.  They are actuarial calculations made by organisations whose business is pricing risk.  Swiss Re is in the business of being right.  If they thought the losses were smaller, they would have published smaller numbers.  They did not.

The Carbon Market Failure: A Case Study in Structural Dysfunction

The climate machinery produced a second mechanism alongside the COP summits: the carbon market.  The premise was logical.  Price emissions.  Let markets find the cheapest abatement.  Drive capital toward low-carbon alternatives.  The voluntary carbon market (VCM) grew rapidly on that premise, with credits jumping 86 per cent in value between 2019 and 2021.  Then the numbers were examined.

Nature-based offset prices — the category marketed as sequestration from forests and wetlands — collapsed from US$15 per metric ton in June 2022 to below US$1 per metric ton by mid-2023.  Prices on the Xpansiv CBL exchange, the primary spot market, fell by over 80 per cent in eighteen months.  Corporate buyers including Shell, Nestlé, EasyJet, and Fortescue Metals Group publicly retreated from offsets.  The Integrity Council for the Voluntary Carbon Market (ICVCM), the body established to set quality standards, applied its Core Carbon Principles (CCPs) to the market in 2024.  The result: 32 per cent of all unretired voluntary carbon credits — 236 million credits — failed the test.  Only 3.6 per cent of the market received approval.  Every renewable energy credit in the market was disqualified on additionality grounds: if the project would have happened without carbon revenue, the credit is not real.  Most of them would have.

The collapse of the voluntary carbon market is not a market failure.  It is the predictable consequence of building a market on unverifiable claims.  Forestry projects claiming to have saved trees that were never at risk.  Wind farms claiming credit for electricity that would have been built regardless.  Payments for non-events certified by organisations with a direct financial interest in approval.  The voluntary market was, in the terminology of financial services, a product of the imagination.

The Compliance Market: The Mechanism That Works — When It Is Used

The contrast with the compliance carbon market is instructive.  The European Union Emissions Trading System (EU ETS) sets a hard cap on total emissions from covered sectors, issues a fixed number of allowances, and reduces that cap annually.  EU ETS prices broke records in February 2023, surpassing €100 per metric ton.  Even after pulling back to €78, compliance prices remained forty to eighty times higher than the collapsed voluntary credit prices.  Why?  Because compliance is mandatory.  The mechanism has enforcement.  A covered facility that exceeds its allowance faces a penalty.  The cap declines.  Companies must reduce emissions or pay to emit.

The EU’s Carbon Border Adjustment Mechanism (CBAM), phased in from 2023, extends the discipline to imports: goods from countries without equivalent carbon pricing bear a carbon cost on entry into Europe.  This is what enforcement looks like.  It is not complicated.  It requires political will and the willingness to impose costs.  The critical design feature that the voluntary market lacked and the compliance market contains is fungibility with enforcement.  An EU Emissions Trading Allowance (EUA) is a standardised, exchange-traded instrument subject to regulatory oversight by the European Securities and Markets Authority (ESMA), which published its first annual report on EU carbon markets in 2024.  It trades on established derivatives exchanges.  It generates a secondary market in futures, options, and structured products.  It is, in the language of financial markets, a real asset.

Article 6 of the Paris Agreement, whose rules were finally adopted at COP29 in Baku in November 2024, creates the international framework for credit transfers between countries — so-called Internationally Transferred Mitigation Outcomes (ITMOs).  This is the architecture for a global compliance-grade carbon market.  It is the first credible mechanism for making credits from Southeast Asian blue carbon — from seagrass meadows, mangroves, and coastal wetlands — fungible within the international compliance infrastructure.  That fungibility matters.  A credit that trades on an established exchange, with regulatory oversight, against a mandatory cap, is a financial instrument.  It generates a secondary market.  It attracts institutional capital.  It prices real scarcity.  The voluntary market sold the story of scarcity without the substance.  The compliance market is scarcity.

Singapore is not a disinterested observer in this.  The Carbon Tax Act, amended in 2022, raised Singapore’s carbon tax to S$25 per metric ton in 2024 and sets a trajectory to S$50 to S$80 by 2030.  Singapore’s International Carbon Exchange, through the ICE GreenTrace platform, is positioned to be the settlement infrastructure for high-integrity compliance credits from Southeast Asian blue carbon projects.  The supply of blue carbon — seagrass, mangroves, coastal wetlands — is concentrated in exactly the region where demand for compliance credits is growing fastest.  This is not philanthropy.  This is a market.  The countries that build the infrastructure for compliance-grade carbon credits, and that hold the underlying blue carbon assets at scale, will benefit materially from the correction that is coming when voluntary credits are displaced by verified compliance instruments.  The window is open.  The Article 6 framework exists.  The question is whether governments and institutions move before or after the crisis forces them to.

The Trajectory

The IPCC projects the following under a 2.6 degree trajectory — which is the best-case outcome under current pledges, not under current policies:  Widespread coral reef collapse above 1.5 degrees, which is less than four years away at current rates.  Displacement of hundreds of millions of coastal residents from sea level rise and intensifying storms.  Severe agricultural disruption across the tropics, where the most food-insecure populations live.  Accelerating feedback loops — Arctic methane release, Amazon dieback, permafrost thaw — that remove warming from political control entirely.  Under the current policy trajectory of 2.8 degrees, those consequences arrive earlier and harder.  The biodiversity picture compounds the economic damage.  Species are going extinct at approximately 1,000 times the natural background rate.  Pollinators, soil microbiota, coastal fish stocks — the biological infrastructure of the food system — are degrading faster than the food system is adapting.

The equity argument compounds the national interest argument.  The people most exposed to these consequences are the people least responsible for causing them.  Sub-Saharan Africa, South Asia, and Small Island Developing States contribute a fraction of global emissions and absorb a disproportionate share of the consequences.  The G20, which produces three-quarters of global emissions, attends the summits, produces the communiqués, and flies home.

The voters of those countries continue electing governments committed to growth, consumption, and deferral.  They do this knowingly.  The information is available.  The science is not contested.  The projections have been accurate.  People prefer present comfort to future survival, and they vote accordingly.  This is not a failure of the system.  This is the system working as designed.  The system was designed by governments to produce the appearance of action while avoiding its substance.  It has done so with remarkable consistency for thirty years.

The Assessment

The UNFCCC held COP30 in Belém, Brazil, in November 2025.  Countries arrived with updated pledges.  The pledges were insufficient — more than 70 countries did not even submit updated Nationally Determined Contributions.  The fossil fuel phase-out language was made voluntary after Saudi Arabia and Russia objected; the final text did not mention fossil fuels at all.  A US$120 billion adaptation fund was pledged by developed nations; developing countries said US$360 billion was needed.  The Just Transition Mechanism was adopted without the funding to operate it.  Australia signed the Belém Declaration and then announced plans to proceed with new gas projects.  COP31 will be held in Australia.  A communiqué was issued.  The language was stronger than last time.  Emissions continued rising.

The process is not broken.  It is working as its architects intended — as a pressure-release valve for public concern, a mechanism for governments to demonstrate engagement without delivering action, and a conference industry that employs a significant number of people whose professional existence depends on the problem remaining unsolved.  The national interest argument for action is not contested.  Fourteen per cent of global GDP — the Swiss Re projection for the current policy trajectory — is not an environmental number.  It is a solvency number.  Governments choosing to ignore it are not making a trade-off between growth and environment.  They are borrowing against the future, as governments are prone to do, and assuming their successors will pay.  Their successors will pay. The mathematics does not negotiate.  Civilisations that cannot learn from evidence decline.  The rate of that decline is the only variable still in play.

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Terence Nunis | Executive Chairman, Equinox Zenith & Red Sycamore | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Is the Increase In Singapore’s Core Inflation from the Middle of Next Year a Concern?

The following is my answer to a Quora question: “Is the increase in Singapore’s core inflation from the middle of next year a concern?”

You are seeing the numbers, but looking at the wrong thing.  The headline is that Singapore’s core inflation reached 1.6 per cent in June 2026, up from 1.4 per cent in May.  The concerned reaction is understandable.  It is also premature.  The Monetary Authority of Singapore’s forecast band for core inflation in 2026 is 1.5 to 2.5 per cent.  At 1.6 per cent, Singapore is at the lower bound of its own projection.  Overall CPI came in at 1.9 per cent for June.  These are not the numbers of a runaway price environment.  They are the numbers of an economy running warm on the back of growth — which, in an economy of Singapore’s structure, is what you would expect.

GDP growth for Q2 2026 was 6.2 per cent year-on-year.  Q3 2026 delivered 5.4 per cent.  The International Monetary Fund projects 5 per cent for the full year.  Manufacturing grew 7.5 per cent, driven by semiconductors.  Construction grew 8.8 per cent, driven by data centres.  Singapore accounts for 10 per cent of global semiconductor output and 20 per cent of semiconductor equipment supply.  The economy is not struggling.  The economy is being rebuilt around artificial intelligence infrastructure, and that process costs money.  Some of that cost appears in the price level.  This is what demand-pull inflation looks like when the demand is productive.

The Straits of Hormuz: A Tax on Asian Energy

The external shock is real, and it is not Singapore’s fault.  The Strait of Hormuz carries 18.4 million barrels of oil per day — one-fifth of global supply.  84 per cent of Hormuz crude flows to Asia.  The conflict in the Middle East has cut net supply by 11 million barrels per day.  Brent crude has crossed US$100 per barrel.  The strait also carries 110 billion cubic metres of liquefied natural gas per year.  QatarEnergy’s LNG capacity is down 17 per cent.  Asian spot LNG prices have risen from US$10 to US$12 per million British thermal units to above US$25.  European buyers are paying €500 million per day in additional energy costs — a figure that understates the Asian exposure, given where the physical flows go.  Newcastle coal, the regional benchmark, has moved from US$114 to US$132 per tonne.

Singapore essentially imports all its energy.  Higher energy costs feed into utility bills, transport, and manufacturing inputs.  They are not a structural shift in Singapore’s price level.  They are a contingent external shock, driven by geopolitics rather than domestic policy.  The MAS has noted that AI-driven demand pressure is expected to ease in the second half of 2027.  Energy prices will ease when the conflict permits.  Core inflation is forecast to return within the lower half of the MAS band as those pressures unwind.  Singapore’s inflation is manageable, and its causes are well-understood.  The more interesting question is what comes next — and the answer has nothing to do with the CPI.

The AI Boom: Singapore at the Centre

Singapore has positioned itself well for the decade’s defining capital expenditure cycle.  Singapore is a data centre hub for Southeast Asia, a semiconductor manufacturing base of global importance, and a financial gateway for the region’s technology investment flows.  The hyperscaler build-out — Microsoft, Google, Amazon, Meta — has treated Singapore as essential infrastructure.  Data centre construction has driven the 8.8 per cent surge in the construction sector.  The semiconductor equipment cluster supports the regional AI chip supply chain.

These are not small numbers.  Global hyperscaler capital expenditure exceeded US$700 billion in 2026, according to Moody’s estimates.  A significant fraction of that spending flows through or lands in Singapore — in land, power, talent, logistics, and financial services.  The GDP numbers reflect this.  The construction numbers reflect this.  The current account reflects this.  For Singapore’s immediate growth story, the AI boom has been a gift.  The concern is what happens when the boom encounters arithmetic.

The AI Debt Cliff

In December 2025, Bank of America warned investors to brace for what it called an “air pocket” in artificial intelligence spending.  The warning was not about whether AI is useful.  It was about whether the capital expenditure cycle is sustainable at its current scale and pace.  The numbers are uncomfortable.  Amazon, Google, Meta, Microsoft, and Oracle collectively issued US$121 billion in debt in 2025 — four times their average annual debt issuance over the preceding five years.  We project an additional US$100 billion in 2026.  The shift in funding from operating cash flow to debt issuance is the signal.  When the cash flow runs out and the debt begins, the question of return on investment becomes urgent.  US$8 trillion in AI capital expenditure would require US$800 billion in profit just to cover interest — before returning a cent of principal.  The AI infrastructure supply reportedly grew more than 1,000 per cent between 2024 and 2025.  Rapidly advancing model capabilities mean that the data centre built today could be partially obsolete within five years.  Moody’s has warned of overbuild risk.  Bank of America has warned of the air pocket.  The concern is structural: hyperscalers are committing capital at a scale that assumes monetisation will arrive before the debt service becomes a crisis.  That assumption has not been tested.

Singapore’s Real Challenge: Riding the Correction

If the AI debt cliff arrives — when hyperscaler capital expenditure normalises, when the overbuild is acknowledged, when the debt issuance pace reverses — Singapore will feel it.  The construction sector will slow.  Data centre demand will soften.  Financial services revenue linked to technology investment will contract.  The semiconductor cycle, already subject to its own inventory swings, will interact with AI capex cuts in ways that are difficult to predict.

This is not a reason for pessimism.  It is a reason for preparation.  Singapore has navigated structural economic transitions before from entrepôt to manufacturing, from manufacturing to financial services, from financial services to the knowledge economy.  The institutional capacity for long-range planning exists.  The question is whether it is being applied to the AI transition with the same rigour it was applied to earlier ones.

The specific risks are three.  First, concentration: an economy that has oriented significant capacity toward AI infrastructure is exposed if AI capital expenditure corrects.  Diversification within the AI economy — not just data centres and chips, but AI-driven professional services, biomedical AI, financial AI — reduces that exposure.  Second, talent: the AI transition requires a workforce that can operate and extend AI systems, not merely consume them.  Singapore’s education and training pipeline must produce that workforce faster than the transition demands it.  Third, sovereign positioning: the hyperscalers that built Singapore’s data centres will make capital allocation decisions in San Jose, not in Singapore.  The MAS and the Economic Development Board need contingency plans for the scenario in which that capital moves.

The Assessment

Core inflation at 1.6 per cent is not a concern.  It is a rounding error on an economy growing at 5.4 per cent.  The Hormuz disruption is a real cost and a real irritant, but it will end.  Energy prices are driven by bullets and diplomacy, not by structural economic failure.  The question is whether Singapore can position itself to benefit from — rather than be disrupted by — the AI investment correction.

Singapore has the institutions, the reserves, and the track record to make the transition.  Whether it makes it well depends on decisions being taken now: in the EDB, in the MAS, in the universities, and in the boardrooms of the companies that have made Singapore their regional headquarters.  Inflation is not the problem.  Inflation is the smoke.  Watch the fire.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Is It Possible for Japan to Have a Conservative Government & Loose Monetary Policy Simultaneously?

The following is my answer to a Quora question: “Is it possible for Japan to have a conservative government and loose monetary policy simultaneously?”

Monetary policy is not for the government to set.  In Japan, as in every serious economy, the central bank operates independently of the cabinet.  The Bank of Japan sets interest rates.  The Liberal Democratic Party governs.  These are separate institutions with separate mandates.  That said, the relationship between the two in Japan is not — and has never been — clean.  It is a long, complicated, and occasionally undignified entanglement.  Understanding it requires going back to where the current architecture was built.

Abenomics: The Architecture of the Problem

On 26^th December 2012, Shinzo Abe, Prime Minister of Japan, returned to office with an economic programme.  He called it Abenomics.  It rested on three arrows: aggressive monetary easing, fiscal stimulus, and structural reform.

The first arrow was the consequential one.  Abe publicly pressured the Bank of Japan to adopt an inflation target of 2 per cent and to do whatever it took to reach it.  In April 2013, then-Governor Haruhiko Kuroda launched quantitative and qualitative easing on a scale Japan had never attempted.  The BOJ bought Japanese government bonds, equities through exchange-traded funds, and real estate investment trusts.  By the peak of this programme in early 2024, the BOJ’s balance sheet had reached ¥756 trillion — equal to the entire GDP of Japan.

In September 2016, Kuroda added yield curve control.  The BOJ committed to holding the 10-year Japanese government bond yield at or near zero per cent.  This meant the central bank would buy whatever quantity of bonds was necessary to defend that target, regardless of the fiscal consequences for the government.  The BOJ became, in effect, the government’s financier of last resort — a role that is technically prohibited but functionally unavoidable when the central bank commits to a price target on government debt.

This is how the Bank of Japan came to hold 79 per cent of its ¥717 trillion balance sheet in government securities as of mid-2025.  The BOJ did not stumble into this position.  It was engineered by a conservative government that decided the theoretical independence of the central bank was a dispensable formality when growth targets were at stake.  Abe was assassinated on 8^th July 2022.  His monetary legacy survived him.

The Takaichi Government: Sanaenomics

On 8^th February 2026, Japan held a general election.  The Liberal Democratic Party, led by Prime Minister Takaichi Sanae, won 316 of 465 lower house seats.  It was the first time a single party had held more than two-thirds of the lower house in postwar history.  Takaichi is, by any reasonable political taxonomy, a conservative.  She supports expanding defence spending to above 2 per cent of GDP.  She favours anti-espionage legislation, stricter immigration controls, and the preservation of traditional family law against reformers who want separate surnames for married couples.  She is hawkish on security, nationalist on culture, and has described herself as continuing the legacy of Shinzo Abe.

On economics, she has branded her programme “Sanaenomics” — a continuation of Abenomics with a security dimension grafted on.  The first arrow remains: expansionary fiscal policy, funded by deficit bonds, with public investment directed toward artificial intelligence, semiconductors, and shipbuilding.  She has pledged refundable tax credits for low-income households, the abolition of the provisional gasoline tax rate, and a temporary suspension of the consumption tax on food.

On monetary policy, she has been careful with language while being clear in intent.  She has said fiscal and monetary policy must “align” — the formulation that concerned markets and analysts who remembered how that alignment worked under Abenomics.  She has acknowledged the Bank of Japan’s autonomy over its tools while making it clear that she views current inflation as cost-push rather than demand-driven, meaning she does not believe the conditions for sustained rate hikes have been met.  When Takaichi won the LDP leadership contest in October 2025, analysts immediately reassessed the path for BOJ rate hikes.  The yen weakened.  Equities rallied.  These are the market’s translations of a political signal: rates will stay lower for longer than the central bank might otherwise choose.

What the BOJ Has Done

The Bank of Japan began raising rates in March 2024, when it ended eight years of negative interest rates.  This was its first rate increase since 2007.  The BOJ then raised rates again in July 2024 — a decision with immediate global consequences.  The yen carry trade, a mechanism by which investors borrow cheaply in yen to fund higher-yielding investments elsewhere, began unwinding.  Global equity markets fell sharply.  The BOJ was forced to clarify that it would not raise rates again in the near term.  The episode demonstrated, vividly, that a decade of artificially suppressed rates does not end without pain.

By December 2025, the policy rate had reached 0.75 per cent.  In June 2026, the BOJ raised it again — to 1.0 per cent, a 31-year high — driven by inflation pressure from crude oil prices linked to the Middle East conflict and a weakening yen.  The decision was taken without Governor Kazuo Ueda, who was hospitalised for treatment of a hepatic cyst infection.  The remaining board members acted without him.  That is not a tight monetary policy.  It is the slowest normalisation in central banking history, conducted by an institution that spent a decade buying its own government’s debt at zero yield and is now trying to wean itself off without causing a bond market crisis.

The BOJ’s balance sheet, at ¥717 trillion as of mid-2025, had fallen ¥39 trillion from its peak through quantitative tightening — but government securities still constitute ¥567 trillion of that total.  The BOJ holds the majority of Japan’s government bond market.  Raising rates increases the cost of servicing a national debt that reached ¥1,346.7 trillion at the end of June 2026 — ¥10.95 million per Japanese citizen.  Japan’s debt-to-GDP ratio for fiscal year 2026 stands at 187.6 per cent, a deterioration from the January projection, driven by supplementary budget spending of more than ¥3 trillion.

The central bank cannot normalise aggressively without threatening the fiscal sustainability of the government.  The government cannot consolidate without threatening the growth targets it has staked its political mandate on.  This is the trap Japan built for itself over thirty years, and every interest rate decision since 2024 has been a negotiation with the walls of that trap.

Why a Conservative Government Wants Loose Money

The apparent paradox — a right-wing government presiding over, and indeed preferring, expansionary monetary policy — dissolves once you understand what Japanese conservatism is conserving.  Western conservatism, in its classical form, is associated with fiscal restraint, sound money, and suspicion of government intervention in the economy.  The LDP is a conservative party in the sense that it conserves the existing power structure: the relationship between the party, the bureaucracy, the industrial conglomerates, and the rural constituencies that have returned LDP candidates to parliament for most of the postwar period.  It is not a fiscally conservative party in any meaningful sense.  Japan’s debt-to-GDP ratio did not reach 187.6 per cent under socialist governments.  It reached that figure under the Liberal Democratic Party, which has governed Japan for all but four years since 1955.

Loose monetary policy serves the LDP’s political coalition.  Cheap credit supports large corporations.  A weak yen boosts export earnings for Toyota Motor Corporation, Sony Group Corporation, and the other industrial giants whose health is identified, in the public mind, with Japan’s national health.  Fiscal stimulus, funded by deficit bonds that the BOJ buys to keep yields suppressed, funds the public works and regional transfers that keep rural constituencies loyal.  Takaichi did not invent this arrangement.  She inherited it.  Her distinctiveness lies in adding a national security dimension — directing stimulus toward semiconductors and shipbuilding rather than roads and bridges — while maintaining the same underlying fiscal and monetary logic.

Japan’s current position is sustainable until it is not.  A debt-to-GDP ratio of 187.6 per cent is manageable as long as domestic investors continue to hold Japanese government bonds at yields that remain below nominal GDP growth.  The BOJ’s yield curve control, and before that its zero-interest-rate policy, suppressed those yields artificially for over a decade.  The policy worked because Japan’s domestic savings pool is enormous, Japan’s current account is in surplus, and there is no foreign currency component to the debt that could trigger a sudden reversal.  What has changed is that inflation has arrived.  Japan’s core inflation was above the BOJ’s 2 per cent target for most of 2023 and 2024.  The BOJ is now in the uncomfortable position of needing to raise rates to address inflation while simultaneously being unable to raise rates too far without detonating the bond market.  Each 100 basis points of rate increase on ¥1,346 trillion of central government debt costs the Japanese taxpayer ¥13.4 trillion per year in additional interest expense — equivalent to 2.3 per cent of GDP.

The BOJ’s path to 1 per cent took two years and caused a global carry trade unwind.  The path to 2 per cent — if inflation requires it — would be considerably more turbulent.  Takaichi’s fiscal expansion makes the BOJ’s task harder.  Every additional trillion yen of deficit spending increases the stock of government bonds that need to be financed.  Every additional bond issued is one more reason the central bank cannot raise rates too sharply without triggering a crisis in the market for the paper it spent a decade buying.

Takaichi is aware of this.  Her formulation — that nominal interest rates should remain below nominal growth — is not a naive statement.  It is a statement about the only path on which the current fiscal position is arithmetically sustainable.  She is not asking the BOJ to remain loose because she does not understand monetary policy.  She is asking the BOJ to remain loose because she understands, very well, what happens to the Japanese government’s financing position if it does not.

The Assessment

So: can a conservative government coexist with loose monetary policy?  In Japan, the answer has been yes for thirty years, and for reasons that are not coincidental.  The LDP built a fiscal position that depends on cheap money.  It then elected leaders who understood that political survival depends on maintaining the conditions that make cheap money available.  It also appointed, or pressured the appointment of, central bank governors who understood the political economy of their institution’s independence.  Takaichi is running the same programme with updated branding.  Sanaenomics is Abenomics with a harder security edge and a slightly more honest acknowledgement of the fiscal risks.  The BOJ is normalising, slowly, under the constraint that it cannot normalise too fast without setting off a fiscal crisis that would destroy the political conditions under which it operates.

This is not a contradiction.  It is a trap — elegantly constructed over three decades, maintained by a political establishment that has never found the domestic coalition for the consolidation that would be required to exit it, and papered over by a central bank that has spent a decade pretending that buying half the government bond market is a monetary policy tool rather than a fiscal subsidy dressed in central bank clothing.  The answer to “Is it possible?” is yes.  The better question is: for how long?  Japan’s creditors, mostly domestic, have been patient.  Demographics are not.  Japan’s population of 122.93 million is shrinking.  The domestic savings pool that finances the debt will shrink with it.  At some point, the arithmetic catches up with the politics.  That point is not today.  It may not be this decade.  But it is not a theoretical possibility.  It is a scheduled event.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Is Indonesia’s Stock Market Crisis Self-Inflicted?

The following is my answer to a Quora question: “Is Indonesia’s stock market crisis self-inflicted?”

On 16^th October 2026, MSCI proposed removing Indonesia from its emerging market indices entirely.  Not a demotion to frontier status.  A demotion to standalone — a classification so obscure it carries no index weight and attracts no passive fund flows.  The Jakarta benchmark index fell 11.57 per cent that day, its steepest single-session drop since January 1998.  Investors lost US$60 billion in one afternoon.  More than US$350 billion in market value has been erased since January.

Indonesia’s continued classification as an emerging market was “no longer appropriate” due to “significant concerns” about market dysfunction.  Even a downgrade to frontier status, MSCI said, would not reflect the severity of the problems.

Destroying Investor Confidence in Two Years

President Prabowo Subianto took office on 20^th October 2024.  Within five months, the Jakarta Composite Index had fallen 19.49 per cent.  Bank Central Asia was down 22.25 per cent.  Bank Rakyat Indonesia had lost 26.25 per cent.  Bank Mandiri had dropped 37.08 per cent.

Foreign investors pulled Rp22.21 trillion — US$1.35 billion — from the stock market in the first ten weeks of 2025 alone.  The rupiah hit a record low of Rp16,985 per US dollar in January 2026.  By October, it had fallen further to Rp18,070 per dollar before partial recovery.  Foreign ownership of Indonesian government bonds stood at 13 per cent — down from nearly 40 per cent in 2019.  The trajectory is not a market correction.  It is a sustained verdict on governance.

The first circuit breaker was triggered on 18^th March 2025, when the IDX Composite fell 7.1 per cent intraday — its largest single-session drop since September 2011.  Trading was halted.  The index closed down 3.8 per cent.  One analyst on the trading floor described it as “a good old-fashioned panic.”  That panic had causes.

Danantara: The Sovereign Wealth Fund That Answers to No One

Prabowo launched Danantara Indonesia — Daya Anagata Nusantara — in February 2025.  The stated purpose was a sovereign wealth fund to consolidate state-owned enterprises and mobilise capital for national development.  Initial capitalisation was announced at US$20 billion.  The reality was less tidy.

Danantara sits beyond parliamentary oversight.  It receives dividends from state-owned enterprises that would otherwise flow to the Finance Ministry.  All state-owned companies were placed under its umbrella, reporting directly to the president.  The fund then took over more than four million hectares of plantations and several mines.  It began positioning itself to control commodity exports.  It issued Patriot Bonds, marketed to Indonesians at 2 per cent — a rate that, adjusted for inflation, represents a government request for a patriotic donation dressed up as an investment product.  As of the time of writing, Danantara has not released its legally required financial statement.

A constitutional challenge was filed on 20^th March 2025 by plaintiff Rega Felix, arguing that Law No. 1/2025 — the legislation that created Danantara — had “radically changed” the definition and nature of state-owned enterprises and severed their financial and legal ties to the government.  The effect, critics argued, was to place the assets of the Indonesian state under a structure accountable to the president rather than to parliament, the courts, or the public.  State bank stocks fell immediately after Danantara launched.  The market understood what the government had built before the lawyers filed their papers.

The infrastructure budget, meanwhile, was cut by 75 per cent.  The funds were redirected to the free school lunch programme and to Danantara.  An economy that needs infrastructure to grow had its construction budget slashed so that a holding company without audited accounts could receive a capital injection.

The Nephew Problem

In January 2026, President Prabowo submitted his nephew Thomas Djiwandono to parliament for appointment as Deputy Governor of Bank Indonesia.  Parliament confirmed him unanimously.  Thomas Djiwandono, 53, is the son of economist Soedradjad Djiwandono, who served as Bank Indonesia Governor from 1993 to 1998, and who is married to Prabowo’s eldest sister, Bianti.  Thomas already held the position of Deputy Finance Minister, which he had taken in July 2024 under former President Joko Widodo.  He now holds a seat on the central bank board.  The rupiah fell to its weakest level against the US dollar immediately after Prabowo submitted the nominations.

Finance Minister Purbaya Yudhi Sadewa, when asked about the rupiah’s decline, said it was “not a major concern” and would have “minimal economic impact.”  Investors registered their disagreement in the only language markets speak.  Thomas Djiwandono, for his part, said there was “no other way than to prove my work.”  He is reportedly being positioned for the governor’s job when the current term expires — an outcome that would place the institution, legally required to be independent from the executive, under the stewardship of the president’s nephew.

The Djiwandono brothers represent a pattern, not an anomaly.  Rumours circulated that Budisatrio Djiwandono, Thomas’s brother and a Gerindra Party House member, was being considered for Foreign Minister.  Prabowo’s own son, Ragowo Hediprasetyo, known as Didit, has been placed in politically visible roles.  The Cabinet reshuffle of September 2025 removed Finance Minister Sri Mulyani Indrawati — the most credible economic voice in the government — and replaced her with Purbaya Yudhi Sadewa.

Sri Mulyani Indrawati, former World Bank Managing Director and one of Southeast Asia’s most respected economists, received one hour’s notice of her sacking.  She was chairing a ministry meeting when the call came from the president’s office.  A morning meeting with Prabowo that day had already been cancelled without explanation.  She had offered to resign twice previously.  Prabowo fired her on the third occasion.  The market’s reaction to her departure was not difficult to read.  She had been the last institutional check on a president with expensive ideas and no obvious mechanism for paying for them.

Resource Nationalism: The Ideology in Charge

Prabowo’s economic worldview is not difficult to locate.  He is a resource nationalist.  He believes Indonesia’s commodity wealth — nickel, palm oil, coal, copper, bauxite — is being extracted and exported at prices that do not reflect its true value, with the difference siphoned offshore by foreign companies and corrupt intermediaries.  His solution is state control of the value chain.

The Jokowi administration had already banned exports of unprocessed nickel ore in 2020, forcing downstream processing onshore.  Prabowo extended the logic.  In 2026, he announced that exports of selected raw materials must route through “a single state-owned enterprise.”  The stated rationale was curbing under-invoicing.  The official revenue estimate from this arrangement was US$150 billion annually — a figure that analysts described, charitably, as optimistic.

The rollout was characteristic of the administration.  Officials were reportedly informed of the plan the day before the announcement.  Which commodities were covered remained unclear weeks after launch.  The export entity was scheduled to begin acting as a sales intermediary shortly after the announcement and begin direct trading in January 2027.  Indonesia supplies significant shares of global nickel, palm oil, and coal output.  Disrupting those supply chains without a coherent operational structure does not increase Indonesia’s leverage.  It increases its unreliability.  The China Chamber of Commerce in Indonesia filed a public protest over rising corruption costs.  Chinese companies, which have invested heavily in Indonesian nickel processing, found themselves navigating an environment where the rules changed without notice, and the new intermediary structure had no audited accounts.

Resource nationalism is not inherently wrong as a policy instinct.  The question is whether it is accompanied by the institutional quality to execute it.  In Indonesia’s current configuration, it is not.  What the government has built is a set of state monopoly structures, placed beyond normal oversight, run by politically connected individuals, with no transparent accounting.  That is not resource nationalism.  That is resource capture dressed in nationalist language.

The Goreng-Goreng Problem

MSCI’s warning in early 2026 was not solely about macroeconomic policy.  It was about market structure.  Indonesian brokers have long used the term goreng-goreng saham — “stock frying” — for trading between related parties that artificially inflates a stock’s price.  It is not a new problem.  It is a structural feature of a market where ownership is concentrated, free floats are thin, and enforcement has been episodic at best.

MSCI cited problems with ownership and trading transparency as its primary basis for reclassification.  Regulators fined market participants over trading violations at three listed firms: Dian Swastatika Sentosa, Barito Renewables Energy, and Petrindo Jaya Kreasi.  Five senior officials resigned from the financial regulator and the stock exchange.  The government proposed expanded disclosure for large shareholders and raising the minimum free float of listed companies to 15 per cent.  MSCI froze Indonesian securities in its products and has not publicly confirmed that the proposed fixes are sufficient.  The consultation period runs until April 2027.  Reclassification to standalone is expected around mid-2027 unless MSCI finds “clear evidence of better market governance and functioning.”

UBS estimated US$4 billion in passive fund outflows from the reclassification alone, with potentially another US$15 billion from active investors following.  Foreign investors had already net sold US$4.7 billion of Indonesian stocks in 2026 before the October announcement.  Moody’s and Fitch both moved their sovereign outlooks to negative during the year.  The budget deficit stood at 2.92 per cent of GDP — within the legal 3 per cent cap, but uncomfortably close.  Foreign exchange reserves were US$156.5 billion.  The margin for error was shrinking as the errors multiplied.

The Structural Diagnosis

Indonesia is the fourth most populous country on earth, with 280 million people, the world’s largest nickel reserves, vast palm oil and coal resources, and a location that makes it central to Indo-Pacific trade routes.  It should be a structural beneficiary of supply chain diversification away from China.  The investment case writes itself.

Instead, foreign portfolio investors are leaving, passive funds face forced exits, the currency is at record lows, the finance minister was fired with an hour’s notice, the central bank board has the president’s nephew on it, the sovereign wealth fund has no audited accounts, and the index provider that determines whether global funds can own Indonesian assets is proposing to reclassify the country into investment irrelevance.  This did not happen because of external shocks.  Commodity prices fell, yes.  US tariffs hurt exports, yes.  But Indonesia’s peers in the region did not suffer a comparable market collapse.  While Jakarta plunged, regional markets outperformed.  The divergence is the story.

What Prabowo built in two years was a system that concentrates economic power in the executive, routes state assets through structures beyond parliamentary accountability, removes credible technocrats and replaces them with family connections, and announces major policy changes without operational plans.  Then it asked foreign investors to stay.  They did not stay.

The Assessment

Is Indonesia’s stock market crisis self-inflicted?  Yes.  The acceleration of capital flight, the MSCI reclassification proposal, the currency collapse, the bond market retreat, the departure of Sri Mulyani Indrawati, and the constitutional questions around Danantara are products of domestic policy choices made by one administration in two years.

Indonesia has a long history of recovering from self-inflicted crises.  The 1997-1998 Asian financial crisis ended the Suharto era and produced, eventually, a period of genuine institutional reform.  The question is whether the current trajectory produces a similar correction, or whether the institutional architecture being built — centralised, opaque, and family-staffed — proves more durable than the market’s patience.  Markets are not patient.  MSCI’s consultation period ends in April 2027.  The rupiah does not wait for political cycles.  Indonesia does not lack the resources to be a serious economy.  It lacks, at this moment, a government that understands the difference between controlling an economy and running one.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Has the Bank of Japan Been Too Cautious about Raising Interest Rates?

The Bank of Japan has not been choosing caution.  It has been managing a set of structural contradictions so severe that any significant rate hike would trigger consequences most policymakers would prefer not to see in their lifetimes.  This is not a defence of the Bank of Japan.  It is an autopsy of the decisions that put it here.

Thirty Years of Self-Inflicted Anaesthesia

Japan’s “Lost Decade” came about because the medicine kept changing but the patient refused to change its habits.  The asset bubble burst in 1991.  Property values collapsed.  Equity markets followed.  The policy response was to cut rates — and keep cutting.  The Bank of Japan took the policy rate to zero in 1999.  It introduced quantitative easing in 2001.  It went to negative rates in 2016.  It launched yield curve control in the same year, capping ten-year Japanese Government Bond yields at 0.1 per cent, then 0.25 per cent, then 0.5 per cent, in an escalating series of interventions designed to keep borrowing costs low while stimulating inflation it conspicuously failed to generate.

For two decades, Japan fought deflation with increasing desperation.  Consumers, expecting prices to fall, deferred spending.  Firms, uncertain of demand, deferred investment.  Banks, sitting on mountains of zombie-company debt, deferred lending.  The entire economy learned to wait.  The Bank of Japan enabled all of it.

Explaining the Paralysis

Japan’s national debt stood at ¥1,342 trillion at the end of December 2025 — a new record.  The International Monetary Fund places Japan’s debt-to-GDP ratio at 230 per cent, the highest among developed economies.  The Ministry of Finance projects debt will reach ¥1,473 trillion by March 2026.  Now consider what happens when interest rates rise.  Japan’s Finance Ministry projects interest payments on government bonds will reach ¥16.1 trillion in fiscal 2028 — 1.5 times the fiscal 2025 level.  Debt-servicing costs, including principal repayment, are projected to hit ¥35.3 trillion, which is nearly 30 per cent of total government spending.  A developed economy spending nearly one yen in three on debt service is not pursuing monetary policy.  It is managing a slow fiscal haemorrhage.  Every percentage point the Bank of Japan raises its policy rate tightens the tourniquet on the government’s budget.  The government that sets the Bank of Japan's mandate is the same government bleeding from that tourniquet.  The institutional independence of the Bank of Japan is, in this context, a politely maintained fiction.

Professor Kazuo Ueda became Governor of the Bank of Japan in April 2023, succeeding Haruhiko Kuroda, who had spent ten years building the most aggressive monetary stimulus programme in modern central banking history.  Kuroda left Ueda a US$5.7 trillion balance sheet, a policy rate of negative 0.1 per cent, yield curve control that was actively distorting the Japanese government bond market, and a yen that had collapsed to its weakest level in thirty-two years.  The yen hit 151 against the US dollar in October 2022.  It was the currency’s lowest point since 1990.  The Bank of Japan did not raise rates.  It intervened in the foreign exchange market instead, spending trillions of yen defending a currency level that the market regarded as absurd given the interest rate differential between Japan and everywhere else.  Intervention is expensive.  It is also temporary.  It does not fix the underlying problem.

The underlying problem was this: while the US Federal Reserve raised rates from near zero to over five per cent between March 2022 and July 2023, the Bank of Japan held its rate at negative 0.1 per cent.  The interest rate differential made the yen carry trade — borrow cheaply in yen, invest at higher yields elsewhere — one of the most crowded positions in global markets.  In August 2024, when the Bank of Japan finally raised its rate to 0.25 per cent and signalled further tightening, the carry trade unwound with notable violence.  Japanese equities fell 12 per cent in a single session on 5 August 2024 — the Nikkei’s worst day since the 1987 crash.  Global markets followed.  The Bank of Japan, rattled by the reaction, rapidly softened its language.  A central bank that raises its rate by 25 basis points and triggers a global market event is not operating from a position of strength.  It is demonstrating how much leverage has been built on the assumption of its perpetual inaction.

The Bank of Japan’s defenders argue that Japan needs low rates to stimulate the economy.  This argument has a fundamental problem: three decades of near-zero rates produced none of the stimulation promised.  Real GDP growth was below 1 per cent in 2024.  GDP contracted at a 0.2 per cent annualised rate in the first quarter of 2025.  Japan’s labour productivity ranks last among G7 economies, at 60 per cent of US levels.  Private consumption, 55 per cent of GDP, has grown at a pace that statisticians generously describe as modest.  The economy’s structural problems are demographic, not monetary.  Japan’s population peaked near 128 million and stood at 124 million in 2023.  The fertility rate is 1.3 against a replacement level of 2.1.  Nearly one third of the population is over 65.  The working-age population is shrinking.  Potential GDP growth is estimated near 0.5 per cent per annum.

You cannot cut your way to a younger population.  You cannot QE your way out of a demographic collapse.  Low interest rates do not produce children.  What low rates did produce was asset price inflation that benefited existing wealth holders, a zombie-company ecosystem that prevented capital from being redeployed to productive uses, and a currency so weak that real wages — already thin — were further compressed by import costs.  Real wages in Japan fell 3 per cent in the year to mid-2025, even as headline inflation ran above 3 per cent.  Rice prices rose over 100 per cent year-on-year as of May 2025.  The Bank of Japan spent thirty years fighting deflation.  It arrived on the other side to find that the inflation it created was the imported, cost-push variety — the kind that squeezes households without generating the demand-pull growth the stimulus was meant to produce.

The spring 2024 wage negotiations — Shunto — delivered pay increases of 5.2 per cent, the highest in three decades, which the Bank of Japan cited as a green light for its March 2024 decision to end negative rates.  Total wages then rose 1 per cent in the year to May 2025.  Nominal gains do not survive the translation to real terms when inflation is above 3 per cent.

What “Caution” Looks Like

The Bank of Japan ended negative rates in March 2024.  It raised its policy rate to 0.1 per cent.  Then to 0.25 per cent.  Then to 0.5 per cent by the end of 2025.  As of January 2026, the rate held at 0.75 per cent, with one board member, Hajime Takata, proposing a further hike and finding no support among his colleagues.  Governor Ueda, asked about the pace of future increases, replied that “there is uncertainty on how far we can eventually raise interest rates.”  He is correct.  The uncertainty is structural.  A government bond market that requires the central bank as a permanent buyer cannot absorb a rate normalisation at the pace that inflation would otherwise warrant.  A government spending nearly 30 per cent of its budget on debt service cannot absorb a significant increase in borrowing costs without cutting the social security, public works, and education spending that the ageing population demands.

The Bank of Japan is not being cautious.  It is navigating a set of constraints that thirty years of prior policy choices made inescapable.  The question “has the Bank of Japan been too cautious?” is the wrong question.  The right question is: who created the conditions in which decisive action became impossible?  The answer is the Bank of Japan itself, through two decades of yield curve control, asset purchases, and negative rates that trained markets, government, and industry to depend on cheap money as a permanent operating condition.  Ueda did not build this trap.  He inherited it.  He is, by all accounts, trying to exit it without triggering the crisis that a faster exit would produce.  Whether he succeeds is another matter.  Japan's government bond yields surged in early 2026, reflecting precisely the fiscal tension that any rate normalisation makes visible.  The market is doing the work the Bank of Japan will not.  Markets are less patient than central bankers.  They are also less polite.

The Assessment

Japan needs low rates the way a man with a broken leg needs crutches: not because crutches fix the leg, but because removing them before the leg heals causes the patient to collapse.  The leg has not healed.  It may not heal.  The structural reforms that would allow Japan to normalise rates — immigration policy, labour market flexibility, corporate governance, fiscal consolidation — have been discussed for thirty years and implemented at a pace that suggests nobody in authority is particularly serious about them.

The Bank of Japan is the last institution standing between Japan’s current trajectory and a fiscal crisis of uncomfortable proportions.  It is performing that function by keeping rates low enough that the government’s debt-servicing bill remains manageable.  This is not monetary policy.  It is fiscal support dressed in monetary clothing.  Too cautious?  No.  Too late to have many good options left?  That is the more accurate assessment.  The policy choices that created this situation were made between 1999 and 2023.  The bill arrives on Ueda’s desk.  History will record the caution.  It should also record what made it necessary.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code