Last Friday's non-farm payroll data weakened expectations of a Federal Reserve rate cut. Continued inflationary pressures from the US-Iran conflict and concerns about Japanese fiscal expansion pushed the yield on 10-year Japanese government bonds to a 27-year high on Monday. Valuation losses forced Japanese institutions to sell overseas risky assets and repatriate funds. Meanwhile, rising interest rates put upward pressure on the yen, further suppressing dollar-denominated assets.

U.S. nonfarm payroll data for March will be released tonight, with the market expecting a strong rebound in employment from the contraction in February, adding approximately 65,000 jobs. While the end of strikes and improved weather supported the data rebound, oil price volatility triggered by the Middle East conflict has increased inflation risks, further complicating the prospect of a Federal Reserve rate cut. Policymakers are caught in a dual balancing act between employment resilience and inflationary pressures.

Two senior Federal Reserve officials jointly warned that inflation is a far more serious problem than employment, supporting a tightening of monetary policy. Meanwhile, a White House advisor suggested that the AI supply shock should prompt the Fed to cut interest rates.

KPMG's chief economist stated that the war with Iran will simultaneously bring cost-push inflation and a weak job market. Once stagflation takes hold, a "deep recession" may be the only way out.