NATIXIS Investment Managers, which oversees approximately $1.5 trillion globally, raised its allocation to Japanese equities and pared U.S. exposure on Monday—one day before Japan's 10-year government bond yield touched 3 percent for the first time this century.

The move reflects a directional bet on Japan's real interest rate cycle. Romain Aumond, quantitative strategist at Natixis, said the recent rise in Japan's real rates, driven by growth momentum, signals a "super signal" to overweight Japanese equities. Mabrouk Chetouane, head of global market strategy, added that the forces propelling Japan's stock market are stronger than those in the U.S.

Natixis has maintained underexposure to global bond markets due to negative carry in longer-dated maturities. Chetouane said there is no reason to hold bonds in Japan, Europe or the U.S. "describing it as the same story everywhere." The U.K. 30-year yield reached its highest point since 1998, while Australia's 10-year yield surged to a 15-year high this week. In the U.S. the 30-year Treasury recently climbed to levels not seen since before Treasury Secretary Scott Bessent expanded a buyback program aimed at halting yield ascent.

The timing matters for rates strategy: Bank of Japan Gov. Kazuo Ueda has signaled a rate hike is likely when the board meets later this month. Overnight index swaps are fully pricing in a hike. Aumond noted that BOJ normalization of monetary policy is a positive factor for equities, as higher inflation boosts corporate revenues and earnings—which the market is already pricing in.

Natixis cited Japan's strong economic indicators, including wage growth, as the foundation for continued outperformance of Japanese stocks through 2026 and 2027.