Japan's Yen at 38-Year Low, US Small Caps Surge, Chinese AI Models Gain Share

Key Takeaways

1. Yen hits 1986 low, down 54% from 2011 peak. Japan's 10Y yield reaches 1996 high.
2. US small caps rally over 22% in H1 2026, best since 1991, outperforming large caps by 12%.
3. Chinese AI models account for over 30% of OpenRouter token usage, signaling shifting AI landscape.
4. Market pricing swings from expected Fed cuts to potential hikes, reflecting high uncertainty.
5. Household financial health improves: missed debt payments at 2-year low, stock optimism at 5-year high.

1. Japan: Yen at Historic Low, Yields Surge

1. The Japanese yen weakened to its lowest level against the US dollar since 1986, declining 54% from its 2011 peak. This reflects persistent policy divergence and market pressure. — via 1
2. Japan's 10-year government bond yield climbed to its highest since 1996, signaling changing global rate dynamics and potential BOJ policy shifts. — via 1

2. US Markets: Small Caps Dominate, Rate Expectations Shift

1. US small-cap stocks surged over 22% in the first half of 2026, the best start since 1991, and outperformed large caps by more than 12% — the widest margin since 2001. — via 1
2. Bond markets initially priced in two Fed rate cuts for 2026 but now anticipate 1-2 hikes, a nearly 1% swing in expected policy. — via 1
3. Large speculators' net S&P 500 futures positions turned near positive, and the share of households expecting stock prices to rise in a year exceeded 40%, a five-year high. — via 1 2

3. AI Competition: Chinese Models Overtake OpenRouter, Token Costs Plummet

1. Chinese AI models now account for over 30% of OpenRouter's total token usage, highlighting their growing adoption and competitiveness in the global AI landscape. — via 1
2. @jason reported testing multiple AI models including Perplexity, Hermes, Cowork, and Grok, and noted that token costs on Bittensor's GLM 5.2 subnet have dropped to zero, a striking development for decentralized AI inference. — via 1

4. Other Notable Signals

1. The New York Fed's Global Supply Chain Index cooled in June, with initial disruptions from the Iran conflict fading, though risks remain if the ceasefire ends. — via 1
2. World food prices fell slightly in June, with declines in sugar, grains, and dairy offsetting increases in vegetables and meats. — via 1
3. The probability of U.S. households missing a minimum debt payment over the next three months dropped to 10.8%, the lowest since April 2023, with improvements across all age and education groups. — via 1