The biggest argument for a BOJ disappointment is that with the G7 meeting in Japan in on month on 26–27 May 2016, it’s unlikely that Japanese policymakers will want to draw attention yet again to the idea that they are in the business of manipulating the JPY lower. After all the most recent G20 meeting once again confirmed that absent "disorderly moves" in the Yen, the US would frown on any attempt to dramatically manipulate its currency lower.
"We expect $/JPY to move higher again in the near term and continue to forecast $/JPY at 130 a year from now.... by making the fiscal expansion permanent and funded through money creation (a politically correct phrase for a form of 'helicopter money'), expectations of future inflation should increase and real rates fall"
NIRP is a dud as far as monetary policy goes. Look for more QE shortly...
With everyone from ivory tower academics to sin-street hookers proclaiming the need for and benefits of a "war on cash" to save the world from criminals and tax-evaders (oh yeah and to stop NIRP-driven savers from hording cash and crushing central planners' dreams), it is perhaps shocking that Bundesbank board member Carl-Ludwig Thiele warned at an event this week that the attempt to abolish and criminalize cash is out of line with freedom. He said that citizens should continue to decide how and in what form they want to use their money.
The problem with forward earnings estimates is that they consistently overestimate reality by roughly 33% historically. The illusion of“permanent liquidity,” and the belief of sustained economic growth, despite slowing in China, Japan, and the Eurozone, has emboldened analysts to continue push estimates of corporate profit growth higher. Even now, as the earnings recession deepens, hopes of a sharp rebound in profitability remains ebullient despite the lack of any signs of economic re-acceleration.
Ever since the USDJPY breached the 110 support level three days ago for the first time in 17 months, the pressure on this all important FX carry cross has been rising, and then overnight, following the latest bout of recurring and increasingly ignored jawboning by various Japanese officials, the Yen soared, with the USDJPY plunging first below 109 and then moments ago dropping as low as 108.02 before rebounding modestly, dragging US equity futures lower with it.
Will the Fed be able to keep the game going? In a word, no. We’ve already seen that even the tiniest of interest rate hikes has gone hand in hand with a huge drop in the markets. Furthermore, the Fed’s subsidies to the banks are now on the order of $11 billion annually, but if they want to raise the fed funds rate to, say, 2 percent, then the annual payment would swell to more than $40 billion.
So far this year, Janet Yellen has not taken a single step in the direction of a “normal” monetary policy; our guess is that she never will. Why not? Is it because she is a witless tool of Deep State cronies? Is it because her economic theory is silly, superficial, and simpleminded? Or is it because she and her predecessor, Ben Bernanke, have done so much damage to the normal world that there is nothing to go back to?
Japan Goes Full Krugman: Plans Un-Depositable, Non-Cash "Gift-Certificate" Money Drop To Young PeopleSubmitted by Tyler Durden on 03/23/2016 20:06 -0400
The Swiss, the Finns, and the Ontarians may get their 'Universal Basic Income' but the Japanese are about to turn the Spinal Tap amplifier of extreme monetary experimentation to 11. Sankei reports, with no sourcing, that the Japanese government plans to unleash "vouchers" or "gift certificates" to low-income young people to stimulate the "conspicuous decline" in consumption among young people. The handouts may not be deposited, thus combining helicopter money (inflationary) and fully electronic currency (implicit capital controls and tracking of spending).
Have we gotten a “confession” to all of that? No.
Regardless of which source ultimately proves more important, the below suggests that market liquidity tends to become more scarce around the end of the quarter at present. We have already seen this effect play out twice in row and it could well be that there will be another replay this quarter.
Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke.
Since 1983, when Hong Kong adopted its currency board system, speculative bets against the Hong Kong dollar (HKD) have ended in the graveyard. Just ask Bill Ackerman. He bet the house in a 2011 attach on the HKD, and he lost big. Now, it’s reported that the likes of George Soros and Kyle Bass are rolling the dice against the HKD. They will lose, too.
Was that it for the great February/March bear market rally?
USDJPY was in full chaos mode ahead of tonight's BOJ statement. With only 5 of 40 economists expecting further actions by Kuroda (and close Abe advisor Hamada suggesting "I think the BOJ wouldn't take further action right now... probably it will be a wise decision," The BoJ decide to stay put - holding rates flat at -10bps, holding QQE buying flat, and maintaining its ETF buying program at expected levels. The biggest surprise though was a language change suggesting the end of NIRP. After 'mixed' results following its NIRP bomb in January, perhaps it is wise to give the 'economy' time to absorb the craziness as Japan's Peter-Pan-ic continues. The initial reaction was weaker Nikkei and stronger JPY.
"The most eye-catching of [fiscal stimulus] views is a call to deploy ‘helicopter money’, which we define as monetary financing of fiscal deficit. However, this argument is misleading. Surely this has already been implemented in many developed countries through QE. Why bring it up now despite it has been already deployed?"