Turning Advance Inflation Intelligence Into Systematic JGB Profits: A 72% Win-Rate Strategy

In this article, you'll discover:

1. XTech's December 2025 CPI forecast predicting +0.2% MoM headline inflation (vs. consensus +0.3%)—released 5 days before tomorrow's BLS announcement with 95% historical sign accuracy

2. Why housing inflation drives the gap: Our models detect continued shelter cost cooling that consensus may be underpricing

3. How to trade it: A systematic 10-Year Japanese Government Bond futures strategy with 72% win rate across 8 years (Nov 2017-Sep 2025) of backtests

4. Complete performance data: 1.01 Sharpe Ratio, 1.85 Sortino Ratio, 40% Kelly Edge, and just 3.9 highly-selective trades per year

5. Why JGBs respond to U.S. CPI: The dollar-yen transmission mechanism and global yield correlations that make JGBs sensitive to U.S. inflation surprises

The Foundation: CPI Forecasts That Generate Trading Alpha

Backtested across an 8-year period (November 2017 - September 2025), XTech's CPI forecasting engine has demonstrated something remarkable: systematically generating trading signals with a 72% win rate in 10-Year Japanese Government Bond futures.

This isn't luck. It's not curve-fitting. It's the natural outcome of having accurate inflation forecasts released 20 days and then 5 days before official data releases, combined with a disciplined framework for translating U.S. macro intelligence into executable trades in global fixed income markets.

The core insight is simple: When our CPI forecasts diverge significantly from market expectations, not only are U.S. Treasuries mispriced—so are Japanese Government Bonds. Our signals identify these moments of divergence, enter positions, and systematically capture the repricing when official data confirms our forecast.

The result? 0.3% annualized unlevered returns with a Sharpe ratio of 1.01 and an exceptional Sortino ratio of 1.85—achieved through just 3.9 trades per year. In Kelly Criterion terms, the strategy exhibits a 40% edge, indicating substantial statistical conviction.

Today, with less than 24 hours until the December 18th CPI release, we're releasing our second (refined) December 2025 CPI forecast—and it shows a significant divergence from consensus that creates a potential JGB trading opportunity.

XTech's December 2025 Forecast: Below Consensus Signals Continued Disinflation

Exponential Technology's second forecast, released on January 14, 2026—just 5 days before tomorrow's official release—projects that December 2025 CPI came in significantly below market expectations:

XTech Second Forecast:

• Headline CPI: +0.2% Month-over-Month (0.1573% unrounded)

• Headline CPI: +2.6% Year-over-Year (2.564% unrounded)

• Core CPI: +0.147% Month-over-Month

• Core CPI: +2.64% Year-over-Year

Market Consensus:

• Headline CPI: +0.3% Month-over-Month

• Headline CPI: +2.7% Year-over-Year

Our forecast sits 10 basis points below consensus on a month-over-month basis and 10 basis points lower year-over-year. This gap creates an information edge for traders positioned ahead of tomorrow's 8:30 AM ET release.

See How This Works – Book Demo

Two Forecasts, Two Windows of Opportunity

XTech releases two distinct CPI forecasts for each monthly release, giving institutional clients multiple opportunities to position:

First Forecast (Released ~20 calendar days before official CPI):

• Purpose: Early intelligence for longer-term positioning

• Historical Accuracy (2017-2025):

  • 87% correlation to actual MoM CPI

  • 81% directional accuracy

  • 92% sign accuracy (correct direction of change)

  • Mean Absolute Error: 0.001

  • 94% cosine similarity

Second Forecast (Released ~5 calendar days before official CPI):

• Purpose: Refined precision for final positioning adjustments

• Historical Accuracy (2017-2025):

  • 88% correlation to actual MoM CPI (improves on first forecast)

  • 80% directional accuracy

  • 95% sign accuracy (highest precision)

  • Mean Absolute Error: 0.0009 (improves on first forecast)

  • 94% cosine similarity

This two-stage approach allows traders to:

1. Enter positions early based on the 20-day forecast (higher conviction trades with more lead time)

2. Refine or add to positions based on the 5-day forecast (increased accuracy as release approaches)

3. Capture maximum edge across different holding periods and volatility regimes

Key Driver: Housing Inflation Continues to Moderate

The primary factor behind our below-consensus December forecast is our expectation that housing inflation—which comprises roughly 35% of the CPI basket—came in lower than recent months.

Our advanced machine learning models, which integrate alternative datasets with traditional economic indicators, are detecting continued cooling in shelter costs that may not yet be fully reflected in consensus estimates.

As we highlighted in our December 2026 inflation outlook, disinflation appears to be holding steady rather than stalling. Tomorrow's release could confirm this trend and validate our view that the inflation narrative entering 2026 is more benign than consensus believes.

The Trading Opportunity: 10-Year Japanese Government Bond Futures

The Challenge: Monetizing Early CPI Intelligence Globally

Getting our CPI forecasts 20 days and then 5 days before the official release gives you massive information advantages—but many clients ask: "Beyond U.S. Treasuries, what other trades should I put on during these windows?"

The Solution: Pre-CPI Trading Signals for Japanese Government Bonds

Our research team has developed systematic trading signals that exploit the gap between our CPI forecasts and market expectations across global fixed income markets. One of our highest-conviction strategies targets 10-Year Japanese Government Bond (JGB) futures traded on the Osaka Stock Exchange.

Why JGBs Respond to U.S. CPI

Japanese Government Bonds are highly sensitive to U.S. inflation data through multiple transmission channels:

1. Dollar-Yen Exchange Rate: Lower-than-expected U.S. inflation typically weakens the dollar against the yen, affecting JGB valuations through currency adjustments and capital flows. For a detailed analysis of how our CPI forecasts drive systematic USD/JPY trading signals with a 65.5% win rate, see our October 2025 forecast article.

2. Global Yield Correlations: U.S. Treasury yields serve as the global risk-free rate benchmark, influencing fixed income markets worldwide including JGBs through yield spread relationships. Our 30-Year Treasury Bond strategy has achieved an 83.3% win rate using the same CPI forecasting methodology.

3. Risk Sentiment Flows: Inflation surprises drive global risk appetite shifts that flow through to Japanese assets as international investors rebalance portfolios

4. Monetary Policy Expectations: Diverging inflation paths between the U.S. and Japan affect relative monetary policy outlooks, creating trading opportunities as markets reprice rate differentials

When U.S. CPI comes in below consensus—as our models predict for December—it typically creates short-term directional moves in JGB futures that systematic traders can capture during the immediate post-release window.

Backtest Results: A 72% Win Rate Over 8 Years

When our CPI forecast diverges significantly from market expectations (minimum confidence threshold: 10), traders have executed a 72% win rate on directional 10-Year JGB futures positions entered pre-CPI release.

Strategy Performance Metrics

Asset: 10-Year Japanese Government Bond Futures (OSE: JGB)

Backtest Window: November 2017 – September 2025

Performance Highlights:

• Win Rate: 72%

• Sharpe Ratio: 1.01

• Sortino Ratio: 1.85 (exceptional downside protection)

• Kelly Edge: 40% (significant statistical edge)

• Total Return (unlevered): 2.1%

• Annualized Return (unlevered): 0.3%

Trade Characteristics:

• Average Trades Per Year: 3.9 (highly selective signals)

• Average Trade Duration: 1 day (quick capture of forecast-driven moves)

• Position Sizing Optimal: Kelly-optimal sizing at 40% suggests meaningful capital allocation opportunity

Risk-Adjusted Excellence:

• Profit Factor: Strong positive skew with winning trades consistently larger than losing trades

• Maximum Drawdown: Limited due to high selectivity (confidence threshold 10)

• Correlation to Equities: Low correlation provides valuable portfolio diversification benefits

See How This Works – Book Demo

Why the December 2025 Forecast Creates a JGB Opportunity

Our December Forecast: The Setup

XTech First Forecast (Released December 23, ~20 days before):

• Early positioning signal released to subscribers

• Initial read on December inflation trends

XTech Second Forecast (Released January 14, ~5 days before):

• Headline MoM: +0.2% (vs. consensus +0.3%)

• Headline YoY: +2.6% (vs. consensus +2.7%)

• Refined with 88% historical correlation and 95% sign accuracy

Market Consensus (as of mid-January):

• MoM: +0.3%

• YoY: +2.7%

The Trading Thesis

Our second forecast of +0.2% MoM represents a 10 basis point divergence from consensus expectations. If tomorrow's official BLS data confirms our below-consensus call, several transmission mechanisms should drive JGB price action:

1. Dollar Weakness: Below-consensus U.S. inflation typically pressures the dollar lower against the yen, creating capital flows into JGBs

2. Treasury Yield Compression: Lower U.S. inflation drives Treasury yields down, pulling global yields (including JGBs) lower through correlation effects

3. Risk-On Positioning: Confirmed disinflation supports dovish Fed expectations, encouraging risk-on flows that benefit Japanese fixed income

4. Year-End Positioning: January trading following year-end rebalancing can amplify CPI-driven moves in international markets

The two-forecast system allows early positioning (first forecast, December 23) and then final refinement (second forecast, January 14) with 95% historical sign accuracy ahead of tomorrow's January 15 release.

Signal Mechanics: How the JGB Strategy Works

1. Forecast Divergence Detection

We monitor the difference between:

• Our CPI forecasts (first forecast 20 days ahead, second forecast 5 days ahead)

• Current market pricing (Treasury futures, TIPS breakevens, Fed Funds futures, USD/JPY)

When divergence exceeds our confidence threshold (score of 10 or higher for JGBs), the signals dataset identifies high-probability trade setups. The two-forecast system allows for:

• Initial signal generation from the 20-day forecast

• Signal confirmation or adjustment from the more accurate 5-day forecast

2. Entry Timing

Trades are entered 5-10 business days before the CPI release, capturing the period when:

• XTech forecasts are public (both 20-day and 5-day forecasts)

• Market hasn't fully priced the forecast divergence

• Liquidity is optimal for position entry

Two-Forecast Approach:

• First forecast (20 days out): Allows early positioning for longer-duration trades

• Second forecast (5 days out): Enables position refinement or additional entries based on improved accuracy

3. Exit Strategy

Positions are systematically exited:

• Primary exit: Shortly after CPI release when market reprices (typically within 24 hours)

• Risk management: Time-based stops if forecast doesn't materialize

• Average holding period: 1 day

Performance by Confidence Threshold: The Power of Selectivity

One of the most remarkable features of this strategy is how performance improves with higher confidence scores:

Confidence Threshold	Win Rate	Annual Return	Avg Trades/Year
1-5	55-60%	0.1-0.2%	7-9
6-9	65-70%	0.2-0.3%	5-6
10+ (Current)	72%	0.3%	3.9

Key Insight: By waiting for only the highest-conviction signals (threshold 10+), we:

• Cut trade frequency by ~50%

• Increase win rate by 12+ percentage points

• Maintain strong absolute returns despite fewer trades

• Dramatically improve risk-adjusted returns (Sharpe 1.01, Sortino 1.85)

This is the essence of signal-based trading: quality over quantity.

See How This Works – Book Demo

The Method: How XTech Forecasts CPI With Alternative Data

Our CPI forecasting engine doesn't rely on lagging government surveys or economic sentiment. We're processing:

✅ Real-time alternative data across multiple proprietary sources

✅ Granular price signals across categories that BLS surveys won't capture for weeks

✅Machine learning models trained on 8+ years of inflation regime data

✅ Proprietary data partnerships with LSEG providing our forecasts with years of high-quality historical data

The Unifier platform processes this data in real-time, running thousands of scenarios to generate probabilistic forecasts that our research team validates before publication.

This alternative data infrastructure allowed us to continue forecasting accurately even during the October 2025 government shutdown when official BLS data collection stopped—demonstrating the robustness of our approach during periods of traditional data disruption.

Real-World Implementation: Instructions Dataset

XTech Macro Signals provides two complementary datasets:

1. Instructions Dataset (Point-in-Time)

Released approximately 8 hours before the CPI release, this dataset contains:

• Trade direction: Long or short JGB futures

• Entry timing: Exact datetime for position entry

• Exit timing: When to close the position

• Confidence score: Our conviction level (December forecast confidence to be determined)

• Position sizing guidance: Based on Kelly criterion

2. Summary Dataset (Performance Tracking)

Updated after trade execution with:

• Realized P&L: Actual returns from following instructions

• Updated statistics: Rolling win rate, Sharpe, Sortino

• Trade attribution: Which forecasts drove profitable signals

• Cumulative metrics: Since-inception performance tracking

All signals are point-in-time and never revised, ensuring complete transparency and replicability. Our backtests reflect actual executable strategies with realistic market conditions including transaction costs.

Recent Forecast Accuracy: September 2025

Our track record speaks for itself. For the most recent complete CPI cycle before year-end:

September 2025 CPI Forecast Performance:

• MoM Forecast: +0.304% vs. Actual: +0.31% (within 0.006pp)

• YoY Forecast: +3.0% vs. Actual: +3.0% (exact match)

This pinpoint accuracy on the September release—just months before our current December forecast—demonstrates why our systematic approach continues to generate tradeable alpha in global fixed income markets.

XTech's Forecasting Edge: Earlier and More Accurate

Since launching our CPI forecasting product in January 2025, XTech has consistently demonstrated superior accuracy compared to both consensus and individual economist forecasts:

2025 Performance Highlights:

• XTech Initial Forecast (released ~20 days early): 44.2% hit rate vs. Consensus Initial: 31.6%

• XTech Final Forecast (released ~5 days early): 48.4% hit rate vs. Consensus Final: 33.7%

• Average lead time advantage: 15+ days ahead of consensus formation

For December, our forecast was initially released on December 23—more than three weeks before tomorrow's official announcement. Our second forecast, released yesterday (January 14), maintains our view that disinflation continued through year-end.

See How This Works – Book Demo

What Tomorrow's Release Could Mean

If tomorrow's official BLS data confirms our below-consensus forecast, it would mark another validation of our advanced modeling approach and reinforce the narrative that disinflation held steady into year-end. This outcome could have several implications:

• Federal Reserve Policy: Continued disinflation supports a more dovish Fed stance entering 2026

• Treasury Yields: Lower CPI could pressure yields lower across the curve

• Dollar Weakness: Below-consensus inflation typically weighs on the dollar, strengthening yen

• JGB Positioning: Our trading signals are designed to capture the immediate market reaction through systematic entry/exit protocols

Conversely, if consensus proves accurate and we see +0.3% MoM inflation, it would represent a material deviation from our models' expectations—though our eight-year track record suggests our forecasting methodology remains robust even in evolving macro environments.

Risk Disclosure and Strategy Limitations

What This Strategy Is NOT:

❌ Not a daily trading strategy: Signals fire only 3-4 times per year

❌ Not market-neutral: Directional bets on inflation forecast accuracy

❌ Not leveraged returns: Reported returns are unlevered (though futures allow leverage)

❌ Not guaranteed: Past performance ≠ future results, especially in unprecedented macro environments

❌ Not immune to overnight risk: JGB futures trade during Asian hours; U.S. CPI releases during U.S. hours create execution timing considerations

What You Need to Succeed:

✅ Global futures trading infrastructure: OSE membership or FCM relationship with Asian market access

✅ Capital allocation discipline: Ability to deploy significant capital 3-4x per year

✅ Risk management framework: Position sizing and stop-loss protocols appropriate for international markets

✅ Data integration capability: API access to XTech Unifier platform

✅ Currency hedging consideration: Understanding of USD/JPY exposure in JGB positions

Get Access: Trial the CPI Forecast + JGB Trading Signals

Our CPI forecast dataset includes:

✅ Two monthly forecasts per release: First forecast ~20 days before BLS data, second forecast ~5 days before (increased accuracy)

✅ Confidence intervals and probabilistic scenarios across headline and core inflation

✅ Backtested trading signals across U.S. Treasuries, JGBs, FX, and other rate-sensitive assets

✅ Real-time dashboard access to track forecast performance

✅ API integration for systematic strategies via the Unifier platform

The JGB trading signals highlighted above are available as a licensable dataset—the same data institutional clients are already using to position ahead of CPI releases.

📧 Contact: sales@exponential-tech.ai

📅 Book a Demo

We'll provide:

• Full access to current month forecast + historical performance

• Backtesting dashboard walkthrough

• Technical integration support for Unifier platform

• Custom signal configuration based on your risk parameters

The Bottom Line: Why Now?

In an environment where:

• The Fed recently navigated a historic government shutdown that created data gaps

• Official CPI statistics remain the primary driver of monetary policy expectations

• Tomorrow's December CPI will provide critical evidence on whether disinflation continues

• Global fixed income markets remain highly sensitive to U.S. inflation surprises

...subscribers who receive CPI projections 20 days AND 5 days before the official release have a structural information advantage that no amount of traditional economic analysis can replicate.

The December 2025 forecast is live.

Tomorrow's release is less than 24 hours away.

The JGB futures market is liquid and waiting.

The question isn't whether CPI forecasts matter for global trading. It's whether you're trading with them or against them.

About XTech Global Macro Forecasts

Exponential Technology provides institutional-grade macroeconomic forecasts powered by alternative data and machine learning. Our CPI forecasting track record:

• Two forecasts per release: First forecast ~20 days before (87% correlation), second forecast ~5 days before (88% correlation, 95% sign accuracy)

• 35.1% hit rate (2017-2025) vs. 30.9% for Reuters Poll consensus

• 24 days average lead time vs. 2 days for consensus final polls

• Operated continuously through 2025 government shutdown when official data collection stopped

When traditional data fails, XTech delivers.

Disclaimer: This material is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Trading futures involves substantial risk of loss. XTech Macro Signals are provided as data, not recommendations. International futures trading involves additional risks including currency fluctuation, time zone execution challenges, and foreign market regulations.