strong control of the government and its high approval rating are steadily raising the chance of success. We stay overweight Japanese equities and grow wary of the short yen trade, as capital inflows and rising growth expectations (chart of right) are ultimately bullish for the currency. Watch next week’s BoJ meeting, led by newly appointed Governor Kuroda, for new reflationary measures. e The Euro area economy remains in recession, while policy makers are making little effort to reverse the contraction. We monitor signs of any large deposit flight post Cyprus over coming weeks and months to judge whether the bailout may actually be worsening conditions in the Euro. Economic forecast momentum remains negative (chart of right). These are good reasons to underweight the Euro area, if not all of Europe, across asset classes, against the rest of the world. e The US, in contrast, is seeing better spending from both corporates and consumers than we could have expected post Fiscal Cliff and sequestration. But given the huge amount of fiscal drag, which is a fact, we want to see another 1-2 months of data before extrapolating the good news. It did support US equities in recent weeks, which continue to benefit from US corporates issuing debt to buy their own shares and others', through M&A. This corporate rotation from debt to equities is almost exclusively a US flow, which helps explain US equity outperformance. e Across risk assets, we are similarly seeing huge delinking, with equities rallying greatly and commodities and credit secing no gains (chart p. 1), very much unlike last year. Commodities are delinking as there are no growth upgrades in EM, and inflation concerns are concentrated on two countries, UK and Japan. Credit is delinking as most investors are massively overweight credit versus equities, as evidenced by the disparity in buying flows in 2011-12. Relevering by US corporate and the Fed debating the end of QE are signaling that the 3-decade long rally in bond