Bank of Japan

"The decline in asset yields especially during QE3 created large wealth effects. Since the Fed's QE started at the end of 2008 the PE multiple of the S&P500 index (12-month forward) went up by five points, from 10.5 at the end of 2008 to 15.5 currently. This PE multiple expansion is responsible for around 650 index points or 32% of the current S&P500 index level. Extending that to the total stock of US corporate equities ($29tr currently), it implies an equity wealth boost of $9tr."

“Kuroda loves a surprise - Kuroda doesn’t care about common sense, all he cares about is meeting the price target,” Folks, look-out below.  As George W. Bush said in another context... this sucker is going down!

Bankruptcies in Japan more than doubled in the first nine months of 2014 compared with the same period a year ago. Japan has embarked on a radical monetary experiment to spur inflation. But it may backfire and lead to stagflation and in a worst case scenario a German ‘Weimar’ style hyperinflation ...

From a market perspective the move today was almost perfectly timed coming on the heels of a Federal Open Market Committee meeting which ended quantitative easing and expose the big difference on future monetary paths between the BoJ and the Fed. There is, however, a dark side to this big move.. telling a story of how central banks, even the desperate ones like BoJ, are and remain one-trick-pony institutions: "this is the final round – Japan was ALWAYS going to give it one more shot – now it happened."

What today's JPY-carry-trade-enabling Bank of Japan exuberance means to the 'average joe'...

"THE NIKKEI: BLAST OFF!: It shall be very, very hard to do, but the Nikkei is only now just breaking out to the upside and so we should buy it while selling the Yen at the same time. The “hard trade” is always the best trade and it is going to be very hard to buy this market but we have to with 24-25 thousand as a target."

You know the world's financial markets have become farce when the broad Nikkei 225 stock market of Japan rises 1000 points in 7 hours... The meme that stock 'markets' move on fundamentals not central bank liquidity is officially dead. Let that sink in for a moment...

It was about several months ago when Goldman, which initially was an enthusiastic supporter of BOJ's QE, turned sour on both Abenomics and the J-Curve (perhaps after relentless mocking on these pages), changed its tune, saying an unhappy ending for Abenomics is almost certainly in the cards. Not surprisingly then, in its post-mortem of the BOJ's overnight action, already being affectionately called Banzainomics, is hardly glowing, and is summarized as follows: "We maintain our view that unless the yen continues to depreciate significantly, as a result of the latest QQE action, the BOJ is unlikely to meet its scenario for inflation to stably reach 2% during FY2015. From a political perspective, with nationwide local elections looming in April 2015, we also highlight the potential for harsh criticism of further cost-push inflation driven by the weaker yen among nonmanufacturers, SMEs, and households. Irrespective of the latest easing moves, we believe the BOJ is treading a very narrow path."

Two days ago, when QE ended and knowing that the market is vastly overstimating the likelihood of a full-blown ECB public debt QE, we tweeted the following: "It's all up to the BOJ now." Little did we know how right we would be just 48 hours later. Because as previously reported, the reason why this morning futures are about to surpass record highs is because while the rest of the world was sleeping, the BOJ shocked the world with a decision to boost QE, announcing it would monetize JPY80 trillion in JGBs, up from the JPY60-70 trillion currently and expand the universe of eligible for monetization securities. A decision which will forever be known in FX folklore as the great Halloween Yen-long massacre.

UPDATE: Nikkei 225 +1100 points,  USDJPY +3 handles to 111.00 post-FOMC,

In a surprise move given all the recent congratulatory bullshit from Abe and Kuroda on breaking the back of Japan's deflation and bring about recovery (forgetting to mention record high misery index, surging bankruptcies and a crushed consumer), the Bank of Japan (by a 5-4 vote) raised its bond-buying program from JPY 70 trillion to 80 trillion... and triple its ETF buying to JPY 3 trillion. This move, on the heels of more confirmation of broader foreign asset purchases in Japan's GPIF sent USDJPY instantly gapping 1 big figure higher to 110.30 and Nikkei futures instantly rose 400 points. S&P futures are also surging. Gold and silver are tanking and TSY bonds are selling off.

As Deutsche Bank observes, the Fed has been wanting to hike rates on a rolling 6-12 month horizon from each recent meeting but never imminently which always makes the actual decision subject to events some time ahead. They have seen a shock in the last few weeks and a downgrade to global growth prospects so will for now likely err on the side of being more dovish than in the last couple of meetings. They probably won't want to notably reverse the recent market repricing of the Fed Funds contract for now even if they disagree with it. However any future improvements in the global picture will likely lead them to step-up the rate rising rhetoric again and for us this will again lead to issues for financial markets addicted to liquidity. And so the loop will go on for some time yet and will likely trap the Fed into being more dovish than they would ideally want to be in 2015.

If yesterday's markets closed broadly unchanged following all the excitement from the latest "buy the rumor, sell the news" European stress test coupled with a quadruple whammy of macroeconomic misses across the globe, then today's overnight trading session has been far more muted with no major reports, and if the highlight was Kuroda's broken, and erroneous, record then the catalyst that pushed the Nikkei lower by 0.4% was a Bloomberg article this morning mentioning that lower oil prices could mean the BoJ is forced to "tone down or abandon its outlook for inflation." This comes before the Bank of Japan meeting on Friday where the focus will likely be on whether Kuroda says he is fully committed to keeping current monetary policy open ended and whether or not he outlines a target for the BoJ’s asset balance by the end of 2015; some such as Morgan Stanely even believe the BOJ may announce an expansion of its QE program even if most don't, considering the soaring import cost inflation that is ravaging the nation and is pushing Abe's rating dangerously low. Ironically it was the USDJPY levitation after the Japanese session, which launched just as Europe opened, moving the USDJPY from 107.80 to 108.10, that has managed to push equity futures up 0.5% on the usual: nothing.

The week ahead, as if it mattered.

Overview of the capital markets as if they were not managed by an evil cabal.

"I believe that the Last Great Bubble is bursting — faith in central banks to solve all problems."