Investors Game Out Stagflation Risk in Japan as Oil Prices Rise

Some investors are starting to position for a scenario Japan hasn’t faced in decades, as rising oil prices and a weaker currency stoke stagflation worries and force a rethink of bets.

Global funds including Allianz Global Investors and Amundi SA are already hedging against stagflation — a mix of rising prices and slowing growth — with the Iran conflict nearing the one-month mark. Allianz has reinforced its underweight view on Japanese government bonds and turned neutral on equities and the yen while using options to hedge volatility. Amundi has trimmed its overweight stance for Japanese stocks and is neutral on the nation’s currency, with intervention risks in mind.