• 681 days Will The ECB Continue To Hike Rates?
  • 682 days Forbes: Aramco Remains Largest Company In The Middle East
  • 683 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,083 days Could Crypto Overtake Traditional Investment?
  • 1,088 days Americans Still Quitting Jobs At Record Pace
  • 1,090 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,093 days Is The Dollar Too Strong?
  • 1,093 days Big Tech Disappoints Investors on Earnings Calls
  • 1,094 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,096 days China Is Quietly Trying To Distance Itself From Russia
  • 1,096 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,100 days Crypto Investors Won Big In 2021
  • 1,100 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,101 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,103 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,104 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,107 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,108 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,108 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,110 days Are NFTs About To Take Over Gaming?
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

  1. Home
  2. Markets
  3. Other

Nikkei Futures Up Limit, Yen Collapses, Dollar Up, Gold Down as BoJ Pledges "Unwavering Determination" to Get 2% Inflation

"Whatever it Takes" Japanese Style

It's a world truly gone mad.

In a surprise move today, the Bank of Japan announced further quantitative easing, dominated by long-term Japanese government bonds. The BoJ also announced it and would triple annual purchases of exchange traded funds and property investment trusts.

BoJ governor Haruhiko Kuroda defied objections from four fellow board members, arguing that a tax-hit economy and a lower oil price have led to "a critical moment" in the country's bid to escape from deflation.

The Financial Times quotes Kuroda as follows: The extra action "shows our unwavering determination to end deflation. There was a risk that despite having made steady progress, we could face a delay in eradicating the public's deflation mindset. This is a pretty drastic step, so I think there will be a significant effect [on the economy]."


Stunning Market Reaction

  • Nikkei futures up lock limit (1160 points)
  • S&P 500 up 1.0% (new all-time high)
  • Yen plunges 2.5%
  • Dollar rises 0.9%
  • Gold sinks 2.75%
  • Oil down 1.1%


Nikkei Futures

Nikkei Futures


S&P 500 Futures

S&P 500 Futures


Yen Futures

Yen Futures


US Dollar Futures

US Dollar Futures


Gold Futures

Gold Futures


Oil Futures

Oil Futures

One of my top two trade ideas worked today: Long the Nikkei hedged with a short-yen position. Gold certainly didn't. I still have faith central bank madness will eventually light a fire on my second key idea.


Buyer of Only Resort

Not only is Japan's population in decline, the remaining population is aging. Somehow, Japan believes its economy ought to grow anyway. In addition, Japan wants 2% inflation even though that is the last thing Japanese savers need.

Given that Japanese pension funds are now net sellers of Japanese government bonds, and given Japan's pledge to destroy the Yen to fight deflation, the buyer of only resort of Japan's government bonds is the Bank of Japan.


Currency Crisis Awaits

Japan's government debt is over 250% of GDP. Japan's debt is so high that an interest rate of somewhere between 2 and 3 percent will consume 100% of tax revenue.

Amusingly, the central bank wants 2% inflation and 0% bond rates. How's that going to work?

The answer is "It's not".

Today's message is clearly "get the hell out of the yen".

Somewhere down the line, a global currency crisis awaits. I am willing to hold gold indefinitely until that happens.

 

Back to homepage

Leave a comment

Leave a comment