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It’s Official: The BoJ Has Broken The Japanese Stock Market
It’s Official: The BoJ Has Broken The Japanese Stock Market
As those who follow such things are no doubt aware, The Bank of Japan often says some very funny things about inflation expectations and monetary policy. Essentially, the bank is forced to constantly defend its QE program because as it turns out, monetizing the entirety of gross JGB issuance and amassing an equity portfolio worth just shy of $100 billion on the way to cornering the ETF market comes across as insanely irresponsible even in a world that is now defined by insanely irresponsible central banks.
Perhaps the best example of the BoJ’s absurd rhetoric came in late March when Governor Haruhiko Kuroda said the following about the bank’s 10 trillion yen equity portfolio:
- KURODA: BOJ’S ETF PURCHASES AREN’T LARGE
As we noted at the time, either we don’t know what large means, or Kuroda is simply making things up as he goes along. Meanwhile, the BoJ continues to provide Nikkei plunge protection on an almost daily basis. Here’s what we said in March:
The world has now officially given up any pretensions that Japan’s elephantine QE program isn’t underwriting the rally in Japanese stocks. Not only is the Bank of Japan buying ETFs, they’re targeting their purchases to (literally) ensure that stocks can’t fall by stepping in when things look weak at the open. Unfortunately, Kuroda looks set to run up against the extremely inconvenient fact that while, in his lunacy, he can print a theoretically unlimited amount of money, the universe of purchasable ETFs is limited and so eventually, the BoJ will own the entire market.
…click on the above link to read the rest of the article…
Fitch Downgrades Japan To A From A+
Fitch Downgrades Japan To A From A+
With the USDJPY’s ascent to 125, 150 and higher having seemingly stalled just under 120, with concerns that the BOJ may not monetize more than 100% of its net debt issuance suddenly surfacing, the BOJ and the Nikkei would take any help they could get. They got just that an hour ago when Fitch downgraded Japan’s credit rating from A+ to A, citing lack of sufficient structural fiscal measures in FY15 budget to replace deferred consumption tax increase.
But don’t panic, Fitch says: it expects Japan’s gross debt to GDP ratio to “stabilize around 250% of GDP in 2020.” Perhaps the fact that Fitch did not predict the complete collapse of the Japanese economy is why the USDJPY spiked then promptly reversed and is trading almost unchanged, the same as Nikkei futures.
See, if Fitch had predicted a stabilization level of 2,500%, then Japanese stocks would be limit up today. Because remember: in the New Normal, only a completely socio-economic collapse and terminal currency devaluation leads to limit up in regional stock markets.
As to what really prompted the downgrade, which the BOJ was hoping would lead to a far more negative reaction for the JPY, here it is:
Full Fitch note:
Fitch Ratings-Hong Kong-27 April 2015: Fitch Ratings has downgraded Japan’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to ‘A’ from ‘A+’.
- The issue ratings on Japan’s senior unsecured foreign and local currency bonds are also downgraded to ‘A’ from ‘A+’.
- The Outlooks on the Long-Term IDRs are Stable.
- The Country Ceiling is downgraded to ‘AA’ from ‘AA+’ and the Short-Term Foreign Currency IDR is downgraded to ‘F1’ from ‘F1+’.
KEY RATING DRIVERS
The downgrade of Japan’s IDRs reflects the following key rating drivers:-
…click on the above link to read the rest of the article…
BREAKING BAD (DEBT) – EPISODE THREE
BREAKING BAD (DEBT) – EPISODE THREE
In Part One of this three part article I laid out the groundwork of how the Federal Reserve is responsible for the excessive level of debt in our society and how it has warped the thinking of the American people, while creating a tremendous level of mal-investment. In Part Two I focused on the Federal Reserve/Federal Government scheme to artificially boost the economy through the issuance of subprime debt to create a false auto boom. In this final episode, I’ll address the disastrous student loan debacle and the dreadful global implications of $200 trillion of debt destroying the lives of citizens around the world.
Getting a PhD in Subprime Debt
“When easy money stopped, buyers couldn’t sell. They couldn’t refinance. First sales slowed, then prices started falling and then the housing bubble burst. Housing prices crashed. We know the rest of the story. We are still mired in the consequences. Can someone please explain to me how what is happening in higher education is any different?This bubble is going to burst.” – Mark Cuban
Now we get to the subprimiest of subprime debt – student loans. Student loans are not officially classified as subprime debt, but let’s compare borrowers. A subprime borrower has a FICO score of 660 or below, has defaulted on previous obligations, and has limited ability to meet monthly living expenses. A student loan borrower doesn’t have a credit score because they have no credit, have no job with which to pay back the loan, and have no ability other than the loan proceeds to meet their monthly living expenses. And in today’s job environment, they are more likely to land a waiter job at TGI Fridays than a job in their major. These loans are nothing more than deep subprime loans made to young people who have little chance of every paying them off, with hundreds of billions in losses being borne by the ever shrinking number of working taxpaying Americans.
…click on the above link to read the rest of the article…
How Many More “Saves” Are Left in the Central Bank Bazookas?
How Many More “Saves” Are Left in the Central Bank Bazookas?
The master narrative of the global economy shifted six years ago from “China will push global growth for decades to come” to “the central banks can push global growth for decades to come.”
Time after time we’ve witnessed enfeebled global markets jolted out of terminal declines by central bank pronouncements and new money-printing policies. Never mind that the European Central Bank’s (ECB) Mario Draghi had no concrete proposals in hand when he announced the ECB would “do whatever it takes” to save the European Union from the financial consequences of its reckless abandonment of risk management; the mere announcement was enough to trigger a massive reversal in global markets.
The major central banks have tag-teamed one rally in global stock and bond markets after another: the U.S. Federal Reserve goosed markets in 2008, 2009, 2010, 2011, 2012 and 2013, only ending its various quantitative easing (QE) money-emitting programs in late 2014.
The ECB saved the day with Draghi’s “whatever it takes” PR gambit and more recently with its own QE money-printing program.
The Bank of Japan (BOJ) injected monetary amphetamines into global markets with Abenomics, a last-ditch effort by the BoJ and the government of Japan to crush the value of the Japanese yen and import inflation.
The People’s Bank of China (China’s central bank) has kept the credit spigot open wide for years, unleashing one of the greatest credit expansions in recent history.
…click on the above link to read the rest of the article…
Kuroda Says BOJ to Mull Fresh Options in Case of More Easing
Kuroda Says BOJ to Mull Fresh Options in Case of More Easing
Bank of Japan Governor Haruhiko Kuroda signaled the central bank may need to look at fresh options if more stimulus is needed to propel inflation to levels unseen since stagnation set in two decades ago.
“If, really, our possible path to 2 percent inflation is significantly affected, then of course we can make adjustment to our monetary policy,” Kuroda said in an interview with Bloomberg Television in Davos, Switzerland, on Friday. Asked whether the BOJ will have to get more creative, he said “yes, I think so.” He declined to specify the options available.
Kuroda, 70, spoke days after the BOJ cut its inflation projection for the coming fiscal year, a move that reinforced forecasts for further stimulus by October. While Kuroda’s unprecedented scale of asset purchases has pulled the world’s third-largest economy out of 15 years of entrenched deflation, he’s confronting — like his European counterparts — mounting pressures depressing price gains, and subdued growth.
Kuroda and his colleagues have channeled most of their purchases into the government-bond market, sending yields on 10-year notes to a record low of 0.195 percent this week. The BOJ’s program also include exchange-traded funds and real-estate investment trusts.
…click on the above link to read the rest of the article…
The ECB Will Fail Given The “History Lessons Of US And Japan”, Warns Deutsche Bank
The ECB Will Fail Given The “History Lessons Of US And Japan”, Warns Deutsche Bank
Recall that the stated purpose behind the reason why Mario Draghi’s ECB is about to launch a European government debt monetization program ranging between EUR500 and 1000 billion is to halt deflation, spark credit creation and rekindle inflation. Alas, if that is indeed the case, then as Deutsche Bank said has already determined apriori, it will be a failure. Here’s why from the biggest German bank.
First, a broad strokes preview of what the world’s most confused Central bank will do this week:
[The ECB] is trapped down a dark alley and they will bite. For all the pros and cons of public QE as well as the hows and whens, at the end of the day the market has pushed the ECB into that corner. Within the context of the practical limitations of QE, we have no doubt that Draghi once again will leave a warm fuzzy feeling that they are prepared to do all that it takes. Of course, like OMT, it probably doesn’t mean they are buying BTPs come February 1st, but that doesn’t matter for BTPs. It also doesn’t matter for the Euro zone outlook given the dubitancy of QE efficacy.
And here is why the ECB too will follow its peers, the Fed and BOJ, in failing to boost inflation expectations which at last check were below the Lehman collapse levels and sliding fast (see “The Chart That Terrifies The Fed“)
…click on the above link to read the rest of the article…
Japan’s Last Stand – Portent Of Keynesian Collapse | Zero Hedge
Japan’s Last Stand – Portent Of Keynesian Collapse | Zero Hedge.
Abenomics ‘hope’ and ‘reality’ explained by Diapason Commodities’ Sean Corrigan – do you believe in miracles? After last night’s Japanese GDP print, hope is all that is left (dripping with sarcasm)
So, if the BOJ can just move prices up for long enough, people will start to demand higher wages while companies will gladly accede, since they will be able to count on the Bank printing enough new money for them to meet the extra expense. As such higher wages are spent, this will mean that both the employers’ sales and, miraculously, their profits will increase to the extent that they will soon be jostling to hire more of these nominally costlier workers.
Somehow or other, in one of those Deep Purple, ‘I want everything louder than everything else’ moments, wages will outstrip prices (so avoiding a disastrous fall in real incomes) yet payrolls will rise alongside wages since profits will outpace the gain in the outlay on labour.
Moreover – and here we get to the crux of the issue – though all this new cash is being generated by monetizing vast, ongoing government deficits, the debt stock will rise more slowly than prices, so postponing, if not indeed averting, the nation’s long feared budgetary implosion as it is painlessly inflated away.
Oh – and there will be no first-user Cantillon inequities, no unintended consequences, no spill over to other countries, no undue enrichment or undeserved immiseration of any member of the domestic populace along the way.
Truly Kuroda-san is a mage of the highest order!
…click on the above link to read the rest of the article…
QE isn’t dying, it’s morphing – Thoughts – Nomi Prins
QE isn’t dying, it’s morphing – Thoughts – Nomi Prins.
A funny thing happened on the way to the ‘end’ of the multi-trillion dollar bond buying program known as QE – the Fed chronicles. Aside from the shift to a globalization of QE via the European Central Bank (ECB) and Bank of Japan (BOJ) as I wrote about earlier,what lingers in the air of “post-taper” time is an absence of absence. For QE is not over. Instead, in the United States, the process has simply morphed from being predominantly executed by the Federal Reserve (Fed) to being executed by its major private bank members. Fed Chair, Janet Yellen, has failed to point this out in any of her speeches about the labor force, inflation, or inequality.
The financial system has failed and remains a threat to us all. Only cheap money and the artificial inflation of asset values can make it appear temporarily healthy. Yet, the Fed (and the Obama Administration) continue to perpetuate the illusion that making the cost of (printed) money zero by any means has had a positive effect on the population at large, when in fact, all that has occurred is a pass-the-debt-ponzi-scheme co-engineered by the Fed and big US bank beneficiaries. That debt, caught in the crossfires of this central-private bank arrangement, is still doing nothing for American citizens or the broader national or global economy.
…click on the above link to read the rest of the article…
Gold Falls, Stocks Record Highs as Japan Goes ‘Weimar’, “Here Be Dragons” | Zero Hedge
Gold Falls, Stocks Record Highs as Japan Goes ‘Weimar’, “Here Be Dragons” | Zero Hedge.
Stocks globally surged, while gold fell sharply today despite renewed irrational exuberance on hopes that the Bank of Japan’s vastly increasing money printing will fill some of the gaps left by the apparent end of Federal Reserve bond buying.
The BOJ decided to increase the pace at which it expands base money to a whopping 80 trillion yen ($726 billion) per year. Previously, the BOJ targeted an annual increase of 60 to 70 trillion yen.
The BOJ sailed into deeper uncharted monetary territory with the announcement that they would triple annual purchases of exchange-traded funds (ETFs) and Japanese real-estate investment trusts (REITS) to 3 trillion yen and 90 billion yen respectively.
The Nikkei surged 5% in minutes to a seven year high after the Bank of Japan decision, while gold fell.
These unprecedented monetary events remind us of the old English mapmakers who used to write on uncharted territories on their maps – “Here be Dragons”.
…click on the above link to read the rest of the article…
The BOJ Jumps The Monetary Shark—–Now The Machines, Madmen And Morons Are Raging | David Stockman’s Contra Corner
This is just plain sick. Hardly a day after the greatest central bank fraudster of all time, Maestro Greenspan, confessed that QE has not helped the main street economy and jobs, the lunatics at the BOJ flat-out jumped the monetary shark. Even then, the madman Kuroda pulled off his incendiary maneuver by a bare 5-4 vote. Apparently the dissenters——Messrs. Morimoto, Ishida, Sato and Kiuchi—-are only semi-mad.
Never mind that the BOJ will now escalate its bond purchase rate to $750 billion per year—-a figure so astonishingly large that it would amount to nearly $3 trillion per year if applied to a US scale GDP. And that comes on top of a central bank balance sheet which had previously exploded to nearly 50% of Japan’s national income or more than double the already mind-boggling US ratio of 25%.
In fact, this was just the beginning of a Ponzi scheme so vast that in a matter of seconds its ignited the Japanese stock averages by 5%. And here’s the reason: Japan Inc. is fixing to inject a massive bid into the stock market based on a monumental emission of central bank credit created out of thin air. So doing, it has generated the greatest front-running frenzy ever recorded.
…click the above link to read the rest of the article…
