Header credit goes to UBS’s Paul Donovan, the source of the piece of Japanese skepticism that follows. He takes us first to Sherlock Holmes’ “Silver Blaze”:
Gregory: “Is there any other point to which you would wish to draw my attention?”
Holmes: “To the curious incident of the dog in the night-time.”
Gregory: “The dog did nothing in the night-time.”
Holmes: “That was the curious incident.”
A strong opening gambit, as yen tales go. Read more
By Theo Casey, marketcolor
The loss of simple narratives in forex is something we are learning to deal with together. To continue navigating major and minor crosses we need to make complex narratives more digestible.
Consider dollar-yen. It’s behaving like the bought end of a carry trade. Read more
The yen has gained back 2.4 per cent against the US dollar since it threatened but failed to break Y100 ahead of the most recent, and quiet, Bank of Japan meeting — the first since April 4, when QE on steroids was announced.
Now, we are not suggesting this is definitely the start of a yen correction — if we could predict FX moves for sure we’d be on a yacht, Japan isn’t lacking the political will to give it a further shot, this dip is small in context and we’ve seen its like before — but there is clearly a threat.
Simon Derrick, chief global markets strategist at Bank of New York Mellon, sent through a few thoughts which we think capture that threat quite nicely: Read more
We thought the following from TD Securities’ Richard Gilhooly on Tuesday was a rather insightful way of looking at the whole BoJ effect (our emphasis):
While it remains a contentious point and as yet unproven, Japan’s devaluation and soaring Nikkei vs slumping DAX or Bovespa has all the hallmarks of a competitive devaluation. While competing factions debate the Monetary expansion/QQE, versus beggar-thy-neighbour interpretation, one positive aspect of the Japanese Yen collapse and fear of exported deflation has been collapsing commodity prices with weak growth in export countries (China, Germany, S Korea) and a stronger USD helping a supply story (crude inventories at 22yr highs) and weak demand send commodities into a bear market.
Something to keep an eye on (the respective reaction of the 6mth, 2-year, 5-year, 10-year and 30-year JGBs to the BoJ’s QE onslaught):
This is is a guest post from Philip Pilkington, a writer and research assistant at Kingston University.
In January of this year I noted that the Japanese government was embarking on a stimulus programme and briefly enquired into whether it would likely work or not . At the time media commentary was mixed. Some were saying that it would be a complete failure while others were overflowing with optimism. I was slightly more reserved. Read more
Seemingly everybody is benefiting from the Bank of Japan’s decision to splash the cash. Peripheral bond yields in Europe have fallen and high-yielding carry targets such as Mexico and Brazil are being touted as destinations for Kuroda’s cash.
Where that cash ends up will in many ways define the success or failure of the Abe/ Kuroda push since what really matters is what happens after the cash has left the BoJ. Read more
Gloves off from Kuroda and everyone is very excited…
For those who need a rundown of what the BoJ actually did, here’s a summary from Nomura: Read more
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
Two charts for your morning consideration:
He struggled as a young bureaucrat on a climb with officials and journalists up a 1,500-meter (4,900-foot) mountain in Nagano Prefecture, to the west of Tokyo, according to Utsumi, now president of Japan Credit Rating Agency Ltd. Kuroda “got exhausted and said he’d never do it again,” he said. “He’s not the sporty type.”
Metaphors aside we can ignore that but the rest of Bloomberg’s profile of the man set to take over at the Bank of Japan is worth a read. After all Kuroda has to convince the Japanese that Abenomics is for real now that much of the easy lifting has already been done. Read more
… the Japanese seek inflation everywhere.
All this talk about Japan, JGB bond yields, QE, the yen… and hardly ever does anyone throw up the following chart.
So, without further ado, here is the most important Japanese chart of all courtesy of Capital Economics… the CPI: Read more
“Whatever we can”, you say? Encouraging words from BoJ governor nominee Kuroda over the weekend (even if comparisons with Mr Draghi are overblown). If Cullen Roche is correct, what happens in Japan over the next year or many could change the future of economic policy. So it’s worth spending a bit more time on what Kuroda’s “can” might actually be.
We’ve argued already that much of the low-hanging fruit of expectations and verbal intervention has already been plucked. Read more
Gotta love a good contrarian yen call.
As we’ve written multiple times, the yen’s recent fall been based on policy which has yet to appear, namely on expectations of Abenomics. Japanese authorities have done an excellent job of short-term monetary fear-mongering, but as Gavyn Davies put it recently there is a severe risk that the international hedge funds which have been driving the decline in the yen might come to the conclusion that the emperor has no clothes. Read more
All this has happened before and will happen again… at least, so hopes the Japanese government.
Current finance minister Taro Aso has been keen to channel the spirit of his 1930s equivalent Korekiyo Takahashi, whose polices are widely credited with pulling Japan out of the Showa Depression. It’s understandable. Read more
This Monday edition of rising Japanese equities/weak yen is brought to you by Haruhiko Kuroda, president of the Asian Development Bank and according to various media reports, the likely nominee for Bank of Japan governor.
Kuroda reportedly said early this month he was quite happy at the ADB and had nearly four years to serve of his third term. But to that we say: Mark Carney! Read more
The weaker yen hasn’t done much for Japan’s exports so far, with preliminary data out today showing another record in Japan’s trade deficit. Exports were 6.4 per cent higher, year-on-year, in January and failed to raise as much as imports (up 7.3 per cent). This brought the trade deficit to Y1.63bn.
Societe Generale say not to worry yet, however. Firstly, those figures are not seasonally-adjusted. Month-on-month seasonally-adjusted numbers show the trade deficit shrank from Y678.9bn in January from a revised Y783.8bn in December. Read more
Japanese investors are a powerful bunch in world markets. For a microcosm of this, just look at Australia; Japan plays a big role here in debt and in turn, in currency; and it’s a market that has been very attractive to foreigners of late, keeping the currency stubbornly high regardless of price changes in the country’s key exported commodities. BUT, as with everything yen at the moment, there is a serious shift going on. Read more
It’s the latest in Japanese swings and roundabouts, pushing the yen higher and JGB yields and stocks lower… What to blame? What to blame?
A predictable response to the utter confusion around yesterday’s G7 statement:
First we had this rather bland statement from the G7 — “domestic objectives” etc — and now this:
12-Feb-2013 13:56 G7 OFFICIAL SAYS G7 IS CONCERNED ABOUT UNILATERAL GUIDANCE ON THE YEN, JAPAN WILL BE IN SPOTLIGHT AT G20 MEETING IN MOSCOW
12-Feb-2013 13:56 – G7 OFFICIAL SAYS G7 STATEMENT WAS MISINTERPRETED, STATEMENT SIGNALED CONCERN ABOUT EXCESS MOVES IN JAPANESE YEN
Japan’s Masaaki Shirakawa gave notice on Tuesday that he would be leaving his post as governor of the Japanese central bank on March 19, three weeks earlier than slated.
Can we blame Shirakawa? His departure now coincides with that of two deputy BoJ governors who would be replaced by Abe-nominations (we resisted the urge to go for ‘Abominations’; it wasn’t easy.).
If Shirakawa had stuck around he presumably would have found himself the head of an increasingly mutinous court. Read more
We have to admit we found a point made by Nomura’s Richard Koo last month a little confusing. He argued quite persuasively that deflation is simply not a serious problem for the Japanese today.
JP Morgan’s chief Japan economist Masaaki Kanno weighed in on the rather odd dichotomy in the FT on Monday, arguing that:
The key to understanding the success of Abenomics is the asymmetric response between the currency and the bond markets, which can be attributable to divergent inflation expectations. In the currency market, inflationary expectations rose among investors, mostly non-Japanese, while on the other hand the JGB market remains dominated by Japanese investors, whose inflation expectations appear more or less unchanged.
For US dollar pairs at least…
The Nikkei rose as much as 1 per cent after the BoJ announcement, and then fell nearly as much before recovering somewhat: Read more
The ‘currency wars’ are usually a bit more abstract than this.
Just as the Japanese look to be finally weakening their stubborn yen and spur some inflation in a stagnant economy, there is a suggestion, just a suggestion mind, that a deliberate plan to scupper, or at least hinder, that plan might be afoot. Read more
Oh look, it’s the Abe effect. How exciting. From Reuters:
RTRS – BOJ TO MULL SETTING 2 PCT INFLATION TARGET AT JAN 21-22 MEETING, DOUBLE CURRENT PRICE GOAL – SOURCES
Older entries
1'Collectively, humanity has yawned and decided to let the dangers mount'
2Man walks into a gold bar. Au!
3The end of QE?
4Rise of the funding altruists
5Bird, plane, Abe
Show more6The persistent supply-side constraints in US housing
7Bove vs Bloomberg, redux
8A glorious episode in the history of the Revenue
9Risk goes on, Risk goes off
10When credit markets become boring
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