NEWS AND ANALYSIS

Incisive market commentary and expert opinion

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
 
+ Show blog menu

Categories

Menu

Expand 2017 <span class='blogcount'>(175)</span>2017 (175)
Collapse 2016 <span class='blogcount'>(483)</span>2016 (483)
Expand December <span class='blogcount'>(23)</span>December (23)
Expand November <span class='blogcount'>(41)</span>November (41)
Expand October <span class='blogcount'>(37)</span>October (37)
Expand September <span class='blogcount'>(41)</span>September (41)
Expand August <span class='blogcount'>(52)</span>August (52)
Expand July <span class='blogcount'>(38)</span>July (38)
Expand June <span class='blogcount'>(42)</span>June (42)
Expand May <span class='blogcount'>(42)</span>May (42)
Collapse April <span class='blogcount'>(45)</span>April (45)
PM Bulletin: Exxon Mobil - a proxy for crude?
29 Apr 2016
AM Bulletin: Equity sell-off continues
29 Apr 2016
PM Bulletin: JPY update
28 Apr 2016
AM Bulletin: BOJ disappoints
28 Apr 2016
Holiday Schedule: Early May Bank Holiday
27 Apr 2016
PM Bulletin: BOJ meeting
27 Apr 2016
AM Bulletin: FOMC in focus
27 Apr 2016
PM Bulletin: GBPUSD
26 Apr 2016
AM Bulletin: Markets directionless
26 Apr 2016
PM Bulletin: Apple
25 Apr 2016
Weekly Bulletin: Party like it’s 1999?
25 Apr 2016
PM Bulletin: Big move in USDJPY
22 Apr 2016
AM Bulletin: Weaker earnings weigh on US indices
22 Apr 2016
PM Bulletin: Silver’s pump and dump
21 Apr 2016
AM Bulletin: US indices edge closer to all-time highs
21 Apr 2016
PM Bulletin: ECB meeting look-ahead
20 Apr 2016
AM Bulletin: Silver surge drags gold higher
20 Apr 2016
PM Bulletin: Silver update
19 Apr 2016
AM Bulletin: Dow tops 18,000
19 Apr 2016
PM Bulletin: US indices continue to push higher
18 Apr 2016
Weekly Bulletin: The Fed, China, oil and the yen
18 Apr 2016
PM Bulletin: Brent crude
15 Apr 2016
AM Bulletin: Quiet start to Friday’s trade
15 Apr 2016
PM Bulletin: EURUSD chart
14 Apr 2016
AM Bulletin: Equity rally continues
14 Apr 2016
AM Bulletin: Equities push higher
14 Apr 2016
PM Bulletin: JP Morgan Chase
13 Apr 2016
PM Bulletin: Silver chart
12 Apr 2016
AM Bulletin: Equity rally runs out of steam
12 Apr 2016
PM Bulletin: Schlumberger
11 Apr 2016
Weekly Bulletin: Yen strength remains a concern
11 Apr 2016
PM Bulletin: Stock indices ending the week on a high
08 Apr 2016
AM Bulletin: “Risk-on” again as yen retreats
08 Apr 2016
PM Bulletin: JPY update
07 Apr 2016
AM Bulletin: Oil surge boosts equities
07 Apr 2016
PM Bulletin: Gold struggling to build on Q1 gains
06 Apr 2016
AM Bulletin: Firmer start for global indices
06 Apr 2016
PM Bulletin: USDJPY heading towards 110.00
05 Apr 2016
AM Bulletin: Crude weighs on equities
05 Apr 2016
Weekly Bulletin: Yellen or the data – what to believe?
04 Apr 2016
PM Bulletin: Holiday spending money
04 Apr 2016
April: Non Farm Payrolls Out Today
01 Apr 2016
AM Bulletin: Waiting for Non-Farms
01 Apr 2016
PM Bulletin: Non-Farm Payroll post mortem
01 Apr 2016
Expand March <span class='blogcount'>(41)</span>March (41)
Expand February <span class='blogcount'>(42)</span>February (42)
Expand January <span class='blogcount'>(39)</span>January (39)
 
 
 Thursday 28 April 2016

PM Bulletin: JPY update

 

 

This is a daily chart of the USDJPY over the past 18 months. Here are two headlines that rather neatly bookend what has happened to the currency pair over that time:

“Japan’s central bank shocks markets with more easing as inflation slows” – Reuters 31st October 2014

“Bank of Japan stuns market by holding off on more stimulus” – Bloomberg 28th April 2016




At the end of October 2014, the Bank of Japan (BOJ) took investors by surprise by dramatically expanding its stimulus programme. The reason was that inflation and economic growth had failed to pick up, despite years of quantitative easing. The central bank said it would increase its purchases of Japanese government bonds, exchange-traded funds and real-estate investment trusts. The BOJ would increase its holdings by 80 trillion yen per annum - equivalent to $60 billion per month. So, with a quick scribble on the back of a fag packet I reckon that’s over $1 trillion’s worth of stimulus over the past eighteen months.

Now if you pump that kind of money into an economy with annual GDP of around $4.6 trillion, it should have some effect. It should certainly weaken the currency, which in turn should lift inflation. But regrettably for the BOJ it hasn’t. In fact, the USDJPY has fallen (so the yen has strengthened) by 3.5% between October 2014 and today. Japan’s inflation rate has also fallen:






If you’re regularly buying up large quantities of ETFs on Japanese stocks irrespective of price, you would expect the stock market to rise. But when measured by the Nikkei 225, that hasn’t been the case either. As of last night’s close the Nikkei is down around 2% since October 2014.

Meanwhile, yields are negative for 70% of the Japanese government bond market, with dealers predicting that even the 10-year will be negative before the year-end. That means you can lend the Japanese government money for 10 years with no hope of getting all your money back, let alone any interest.


So this would suggest that the BOJ’s stimulus programme isn’t working and perhaps it’s time to stop. But I doubt that’s why the central bank held off from intervening further this morning. A number of notable Nobel Prize winning economists would say that the problem is that the BOJ hasn’t done enough. So it’s much more likely that the BOJ is preparing to shock the markets once again. Perhaps we should get ready for the world’s first experiment with “Helicopter Money.”


Disclaimer:

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


Add a comment Add comment            

 

 
© 2017 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.