What must the BoJ be thinking as the yen keeps getting stronger post the Japanese central bank’s announcement of negative rates?
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At least, markets are sure it’s a new dawn for Japanese monetary policy. And yeah, we know: this sort of initial euphoria has fizzled out before — but the new Bank of Japan governors appear to have actually come through with the goods:
Click screenshot for the statement. More to come soon, and in the meantime, see this from the FT’s Ben McLannahan: Read more
BoJ governor nominee Haruhiko Kuroda has already been fairly clear that he wants to expand the asset-purchasing programme, and buy longer-term bonds. So how significant are his Draghi-sounding “whatever we can do” comments, really? Read more
Details remain hard to come by after the 7.1 earthquake that hit Japan late Thursday night local time, but recent flashes from Kyodo News indicate that its damage has thus far been limited, though a tsunami warning has been issued for the northeast coast where it hit:
Wall Street closed down 2 per cent and pushed the S&P 500 into negative territory for the year, reports the FT’s global market overview. The Japanese yen hit a record postwar high against the dollar as currency traders bet on repatriation flows, FT Alphaville reports. Risk aversion flared after the European Union’s energy chief said the Japan nuclear reactor situation was “out of control”, triggering renewed fears over the world’s third-biggest economy. Traders quickly realised that the statement by Guenther Oettinger was not predicated on any new information relating to the conditions at the stricken Fukushima plant. That helped send European stocks down for the sixth straight day, and as the selling accelerated in New York, the S&P’s Vix volatility index jumped 19 per cent to 29, its highest since July. Oil lost a chunk of its gains, while key US Treasury yields fell to levels last seen in December. The Swiss franc had risen 1 per cent versus the dollar and was up nearly 2 per cent against the euro as traders again scrambled for perceived havens.
… as overheard by the Bloomberg terminal in the FT NY newsroom.
Back to 77.66 at pixel time after hitting 77.33 (a record postwar high against the dollar). Read more
Toshiba, one of Japan’s biggest industrial groups, claims to have turned the strength of the yen – long the bane of the country’s exporters – to its advantage, reports the FT. The group, which sells everything from refrigerators to nuclear power plants around the globe, said on Monday that changes to its production strategy since 2009 – essentially by buying and building more outside the country – meant it had profited from the yen’s rise in the first half to September. The turnround is remarkable in a country where industrial groups are almost uniformly gloomy about the effects of the soaring currency. On Monday, the yen was trading at about Y80 to the dollar, within a whisker of its all-time high of Y79.70 set in 1995.
The Japanese government is under intense pressure to tackle the economy after the yen surged to a 15-year high against the US dollar and the stock market fell below 9,000, sparking fears of a double-dip recession, reports the FT. Naoto Kan, the Japanese prime minister, said on Tuesday that steep currency moves were “undesirable” but failed to calm markets amid perceptions that he was more focused on a potential leadership challenge next month than the waning economic recovery. FT Alphaville explains why this might not work.
Fears that the US and other major economies are slowing sharply sent investors piling into the safety of government debt on Tuesday, sending UK, German and US bond yields down to record lows, the FT reports. Global equities and commodities such as oil that move on expectations of growth prospects, also fell sharply. Investors sent the Japanese yen to a 15-year high against the dollar as investors exited risky currency trades.
Meanwhile, FT Alphaville reports late on Tuesday that S&P had downgraded Ireland’s long-term debt to AA-minus.