Posts tagged 'Yen'

Great, and not so great, inflation expectations in Japan

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.

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Bye, bye RoRo

For US dollar pairs at least…

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Wild swings and roundabouts courtesy of the BoJ

The Nikkei rose as much as 1 per cent after the BoJ announcement, and then fell nearly as much before recovering somewhat: Read more

Koo, Posen, and other Abenomics dissenters

Abenomics: it’s as divisive as it is fun to say.

We should start this round with Adam Posen, who used to sit on the Bank of England’s Monetary Policy Committee and penned an Abenomics op-ed in the FT on Wednesday. Read more

Ambushing the yen, China style

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

Moving targets and a lack of self-belief at the BoJ

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

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The second coming of Abe… confirmed

The landslide win for the Shinzo Abe-led Liberal Democratic party in Japan at the weekend pushed the Japanese yen to its weakest level against the dollar since April 2011 (inverted chart, don’t ya know):

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Cut out’n'keep guide to prospective new BoJ governors

Japan’s election on December 16 is going to be a doozy.

It’s probably the first election where the role and independence of the central bank is a key issue, says Gavyn Davies. There’s also rather a lot of yen short positions that are riding, at least in part, on the outcome — IMM data out over the weekend shows net shorts have built to levels not seen since 2007. Read more

Yenning for a counter argument

THE YEN IS DOOMED, don’t ya know? And, to be fair, the longer term arguments are hard to fight against but the risk of a near to medium-term yen bounce is significant. Read more

Of anniversaries and odd couples in Japan

Well, we’re cheating a bit here as the anniversary was two days ago, but it still allows for a discussion of the “government versus the central bank” thing going on in Japan and gaining traction everywhere else. It’s been just over a year since Japan’s Ministry of Finance last threw a whole heap of yen at the US dollar — the selling started on October 31 and ended on November 4Read more

Sharp blunted, and it’s not alone

So, Fitch junked Sharp (to ‘B-’ from ‘BBB-’) and the century-old technology company admitted there is “material doubt” about its ability to stay in business. According to the FT, it expects to end the financial year to March with a net loss of Y450bn ($5.6bn), worse than the Y250bn loss it had predicted in August. Last year it lost Y396bn.

And one line in the rating agency’s critique really stuck out:

Fitch does not foresee any meaningful operational turnaround in the company’s core business over the short- to medium-term due to deterioration in its market position as well as in price competitiveness as a result of a high Japanese yen.

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A bento box of pressure at the BoJ

So the Bank of Japan basically did what what was expected of it as did the yen, which gained 0.5 per cent against the dollar as traders saw massive selling of dollar-yen going through as the Bank’s decision hit the wires.

So far, so predictable. We thought UBS’ Paul Donovan summed up the BoJ’s move fairly well:

Japan saw the Bank of Japan defy government pressure to increase the asset purchase program by JPY10tn. They increased it by JPY11tn. No doubt this will be as effective as all the previous actions which have already raised the level of the BoJ balance sheet to 32% of GDP.

But the increasing pressure that is being piled on the Bank by the government is worth drawing attention to. As well as the Bank’s attempts to shift it right back to the government. Read more

Expectations management at the BoJ

Here’s a trend for ya:

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Japan’s very own fiscal cliff

And this one might prove more precipitous than its famous US cousin.

From the FT’s Ben McLannahan:

In an echo of worries in the US over the $600bn of spending cuts and tax increases due to take effect in January – the so-called fiscal cliff – Japanese politicians are at loggerheads over a bill that would allow the government to borrow the Y38.3tn ($479bn) it needs to finance this year’s deficit.

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Japan as the new Switzerland…

… just as it becomes the new China, which is no longer the old China. Ok? Probably not, but we may as well go through the argument anyway. The idea is that Japan, sick of yen strength which it struggles to combat in a risk-driven world, sticks a Swiss-style floor under its currency.

It’s not the newest idea and there are suggestions that a de facto floor is already in place anyway but the argument, from Société Générale, is worth running through as there is certainly more chance of an explicit floor being announced now than there was when we last visited the idea. Read more

A currency war campaign plan for the BoJ

(Chart from RBC Capital Markets.) Read more

The BoJ’s feud-driven asset purchase extension

Japan’s finance minister Jun Azumi was pretty clear about how the country might respond after the FOMC’s decision last week threatened to push the yen higher against the dollar. Today the BoJ made good on the threat, announcing it would increase its asset-purchasing programme to ¥80 trillion ($1.01tn) from ¥70tn.

The yen did this: Read more

Currency wars redux

QE3 has set the dogs of FX verbal intervention loose (well, looser anyway) and it seems probable some actual shots may be fired in the coming while.

Bank of New York Mellon’s alliterative Neil Mellor pointed to Brazil, where the central bank was the first to pass comment on the Fed’s move (with our emphasis): Read more

Yen weirdness du jour

The euro dropped below €1.23 as payrolls missed hard and then the yen… jerked:

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Dear Bank of Japan: So you tried the easing thing a gazillion times…

… might it be time for something (relatively) new? One question that keeps on popping up is, what is stopping Japan from adopting a currency peg a lá the Swiss National Bank? If repeated easing seems to have no real effect why not get explicit?

Essentially, there is little chance of an explicit floor being put in place due to: Read more

Kicking a central bank when it’s down

Japan eased… the yen appreciated. The Bank of Japan may be a bit sad. Is now really the time to rub salt into wounds by reminding the BoJ of the futility of its easing actions – at least where the yen is concerned?

Nomura’s Yujiro Goto certainly thinks so (click charts to enlarge): Read more

RoRo and the BoJ

The Bank of Japan’s monetary policy decision on Friday has been powerfully talked up by analysts and officials alike, with the bank under real political pressure to satisfy market expectations and announce new easing measures that target inflation and growth.

The BoJ surprised markets on February 14 when it announced an increase in its asset-purchasing programme to Y65tn from Y55tn, and an explicit inflation target of 1 per cent. But at its last policy meeting on April 10 it decided not to implement additional monetary easing. Read more

The great Japan crash still not imminent

Tetchiness about Japanese bonds seems to be reaching an all-time high lately. But JGBs are not, so far, playing along. The Japanese parliament’s failure to raise the sales tax in the early hours of Wednesday didn’t do much to rattle Japanese bondholders, as the WSJ’s Real Time Japan blog notes. Strong domestic demand, and foreign buyers expecting that the yen might not remain at the lower rates seen over the last month are two reasons ventured. It’s what Andy Xie described this week as the wrong but self-fulfilling belief in the (perpetually) strong yen, in a lengthy piece about a looming crisis for the currency.

The yen has, nonetheless, seen something of a weakening recently, thanks to the BoJ’s Valentine’s Day intervention. And there is some optimism around Japan’s economic growth generally, though a lot of it relates to the post-tsunami rebuilding effort. Both the rebuilding and the weaker yen are cited as one of the reasons the Nikkei is performing relatively well this year and has returned to its pre-tsunami level. Read more

Yen hedging and a (fiscal) New Year party

Come another season… come another seasonal distortion. The following argument is pegged on the end of the Japanese financial year on March 31 and its potential impact on the yen.

Now, it seems there are always a few old market myths thrown around at this time of year. Read more

Easing into a long yen

The Japanese yen reacted badly to the Bank of Japan’s decision to hit the QE button last month.

And, before the LTRO (1, in particular) and the Bank of England’s operations, such a reaction would have been viewed as normal: QE = currency negative. Read more

Yen falls to seven-month low against dollar

Bank of Japan easing policy has sent the yen to lowest level against the dollar since July, with the spread between two-year US Treasuries and Japanese debt widening the most since August, says Bloomberg. The yen has lost 3.7 per cent since the BoJ unveiled a one per cent inflation target on February 14. UBS reckons the BoJ’s shift could see the yen at ¥85 by the end of year, although the yen could return to its 2011 rally if Japan resumes posting a trade surplus in 2012, according to the WSJ.

Japan confirms stealth intervention to limit yen

The Japanese government has confirmed that it intervened unannounced into foreign-exchange markets to weaken the yen last year, for the first time since 2004, the FT reports. Ministry of Finance data released on Tuesday showed Japan carried out Y1.02tn ($13.3bn) worth of unannounced intervention during the first four days of November, after selling a record Y8.07tn on October 31st, when the yen climbed to a post-war high of 75.35 against the dollar. This so-called “stealth intervention” had been widely anticipated, given discrepancies between the rise in yen balances implied by Bank of Japan reserve balance data, and the Y9.09tn of yen-selling MoF had earlier disclosed for the period between October 28th and November 28th. Even so, the more detailed breakdown may increase pressure on Japan from the US. A December report from the US Treasury Department sharply criticised the G7 nation for its recent unilateral interventions to curb yen appreciation. The BoJ has sold the currency four times since late 2010, under orders from MoF.

Japan conducts stealth yen intervention

Japan’s Ministry of Finance confirmed it carried out “stealth intervention” in the country’s currency by selling yen five times in the final quarter of 2011, reports Bloomberg. The ministry’s quarterly data confirmed speculation that the nation carried out so-called stealth intervention following a record daily sale of 8.07tn yen ($105bn) on October 31, when the Japanese currency climbed to a post World War II high of 75.35 against the dollar. Japan sold a total of 1.02 trillion yen in currency interventions during the first four days of November, according to the report.

The currency pair league table

$/€ races ahead of $/£, $/¥ and $/SFr, but $/AUD has made a strong run from behind…

Actually, the thing that jumps out from Table 4 of the most recent FX trading survey from London’s Foreign Exchange Joint Standing Committee is that none of the columns — April 2011 thru October 2011 — are ranked consecutively. (Click to enlarge) Read more

Aussie dollar hits five-month high

The Australian dollar rose to its highest level against the US dollar in five months on Thursday, as figures showed that the country’s trade surplus rose to a record high last year, buoyed by strong commodity exports. The FT reports that Australia’s currency advanced to a fresh five-month high of $1.0756 against the US dollar in early Asian trading. It later pared some of its gains and was flat against the dollar by the close of trading in London. The Japanese yen continued to strengthen against the US dollar after a week of gaining ground. The dollar declined 0.2 per cent to hit a low of Y76.02.