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Japanese Yen Celebrates The Arrival Of Abenomics 2.0, Opens At 20 Month Low

Tyler Durden's picture




 

FX markets just opened and the market's reaction to the in-the-bag election of Shinzo Abe is 'expectedly' negative for the JPY. Trading up towards 84.50, JPY is back at 20-month lows against the USD with 85.50 the next target. With JPY weakness and the long-end of the Japanese sovereign bond curve at its steepest on record, it seems Abenomics 2.0 may be about to prove out the Keynesian Endgame. As Kyle Bass noted in the past, from the mouth of a Japanese finance minister "It's only money printing when the market says it is" - well, we suspect the market is getting the joke, finally.

USDJPY (higher = weaker JPY)

 

as the skew in USDJPY FX options (3m R/R on the chart below) moves to record highs biased to expectations of further JPY weakness. Notice the correlation between the underlying and the risk-reversal has been high this year as options price in further weakening - very different regime from the 2009-2011 period...another relationship snapping back to reality...(the red oval shows a period where USDJPY was strengthening but options traders were increasingly betting against that strengthening trend)

 

JGB Yield Curve slope (30Y - 10Y) - higher = steeper

 

It seems the two are recoupling...

 

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Sun, 12/16/2012 - 14:23 | 3068876 Towhog
Towhog's picture

They as we cannot stop until it blows

Sun, 12/16/2012 - 15:11 | 3068978 vast-dom
vast-dom's picture

Schizo Abe and his Merry Global Central Fraudsters!

Sun, 12/16/2012 - 18:17 | 3069352 Thomas
Thomas's picture

This shit is nuts.

Sun, 12/16/2012 - 14:24 | 3068878 JamesBond
JamesBond's picture

Inflation Japan Style bitchez

jb

Sun, 12/16/2012 - 14:30 | 3068884 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

Hmm fiats with recent large debt increases selling off? Who woulda thunk it! USD and JPY look like they might get hammered this week. But, but the real crazy part would be an equity AND usd sell-off at the same time....This would leave many scratching their heads.

Sun, 12/16/2012 - 14:29 | 3068888 Josephine29
Josephine29's picture

I remember what the LDP and Abe san promised before the election. An excellent article I read covered it well

 

Let me illustrate from a speech by the head of the Japanese LDP Shinzo Abe.

 

"We want to conduct monetary policy boldly, by taking into account the possibility of revising the Bank of Japan Act"

 

Some care is needed here as “bold action” from Japanese politicians and officials is in my financial lexicon but revising the central banks legal structure had my antennae on full alert.Then Abe san explained. From the Japan Daily Press.

 

"Shinzo Abe, the leader of the opposing Liberal Democratic Party (LDP) and most likely next Japanese Prime Minister, made a statement on Thursday that he wants the Bank of Japan to encourage lending by setting its interest rates to zero or sub-zero."

 

http://notayesmanseconomics.wordpress.com/2012/11/16/will-japan-be-the-first-country-to-have-negative-official-interest-rates/ 

 

How quickly will he make the Bank of Japan change its policy?

Sun, 12/16/2012 - 14:31 | 3068890 vote_libertaria...
vote_libertarian_party's picture

Bond vigilantes going Japanese???

 

Wayyyyyyy behind schedule.

Sun, 12/16/2012 - 14:37 | 3068901 timbo_em
timbo_em's picture

Dear bondholders, please do not worry!

Yours truly,

Japanese Ministry of Finance

Sun, 12/16/2012 - 14:40 | 3068911 malikai
malikai's picture

Does this means that the holder of over $1T in US paper is hurting? Hmm..

Sun, 12/16/2012 - 18:48 | 3069419 lolmao500
lolmao500's picture

Hmmm maybe they'll man up and start selling those to fund themselves instead of running insane deficits...

Sun, 12/16/2012 - 14:42 | 3068914 Piranhanoia
Piranhanoia's picture

Politics seems to have funny descriptions.   Liberal Democratic Party equals hawkish right of center.  Neocon?  Neolib?    The name seems to be an appeasment to the bombers of '45,  and their actions lean more to Hideki T.   Nothing Japan needs more than a war they can't win without using Truman's surprise.

They are stuck

Sun, 12/16/2012 - 14:44 | 3068919 Pareto
Pareto's picture

On a sort of unrelated note, as I was explaining this $USD/JPY relationship to my wife, she said, "hey, you know that new guy in North Korea?....he's sure turning out to be the crazy fucker his dad was.", (making me spit coffeee all over my computer screen), clearly confirms for me that indeed women are from Venus and men are from Mars.  However, I do love her enthusiasm.

Sun, 12/16/2012 - 14:48 | 3068931 DoChenRollingBearing
DoChenRollingBearing's picture

The Yen goes down?  That's cool.  It makes some of our bearings cheaper.

Sun, 12/16/2012 - 14:52 | 3068936 hairball48
hairball48's picture

As an old, poor person, I'll be interested to see what all those old folks in Japan do when their bond market finally goes tits up.

Sun, 12/16/2012 - 14:58 | 3068950 JamesBond
JamesBond's picture

i fear that they will be battling cancer

 

jb

Sun, 12/16/2012 - 18:47 | 3069415 lolmao500
lolmao500's picture

Since they are Japanese, probably suicide. Hell the suicide rate in Greece has doubled... and in Japan it'll be much worse.

Sun, 12/16/2012 - 14:54 | 3068941 Seasmoke
Seasmoke's picture

That is one fucked island.

Sun, 12/16/2012 - 14:56 | 3068943 Magnum
Magnum's picture

Yen was 115-120 for years. No matter what ZH says, at 85 it's still going to cost a lot of money to put on your cowboy boots fly to Osaka and nail a different girl each day you're there. The hotels and meals add up.

Sun, 12/16/2012 - 15:00 | 3068952 Yen Cross
Yen Cross's picture

That was funny/ Good job ;-)

Sun, 12/16/2012 - 15:00 | 3068954 JamesBond
JamesBond's picture

stop reminding me.  I fly in to Narita on the 23rd.  I'm losing so much fucking purchasing power converting dollars to yen

 

jb

Mon, 12/17/2012 - 02:13 | 3070419 Nage42
Nage42's picture

Luckily, if you play your cards right (by making it worth her while), _she'll_ buy you dinner!

 

The number of chicas there who are so desperate to have their shit sorted out by someone who treats them nicely once a month is phenominal... talk about your target-rich-environment (you can read that as target rich-environment, or target-rich environment... either way is accurate).

 

Just before Christmas, there'll be a whole slew of chicas pining for someone to be their "santa clause."  For those that don't know, it's customary for couples to book an expensive hotel for Christmas night... so all the chicas if they don't have a boyfriend go into serious moist-thighs mode moping around that they don't have anyone that night to make them squeel.  It's just awesome... pure awesome.

 

I'd be there now if I could aford the hotel rates sustained, but it's rough at 80-85 Y/$ as it's been recently.  Very much looking forward to the overshoot to +200Y/$ in a year or so... hella hella skirt to be had then!

 

Sun, 12/16/2012 - 15:00 | 3068955 Pareto
Pareto's picture

+100 for making me laugh.....again.

Sun, 12/16/2012 - 14:58 | 3068949 Jason T
Jason T's picture

Armstrong has been predicting the bonds will blow, equiites will bottom in Japan 2013 .. opportunitiy to make major bottom.

 

 

Sun, 12/16/2012 - 17:45 | 3069281 max2205
max2205's picture

Expect another whale trader blow up who gets blown up by this trade

MS GS or JPM?

Sun, 12/16/2012 - 15:05 | 3068964 Quinvarius
Quinvarius's picture

The Yen is a USD satellite currency.  The USA propped it up with currency pegging for decades.  There are all kinds of theories about why the Yen was strong while its fiscal state of affairs were collapsing.  At the root of it was the US government willing to buy Yen for dollars at fixed rates.  None of the other things would have been possible without that distortion.

Sun, 12/16/2012 - 15:06 | 3068966 hairball48
hairball48's picture

Historically, the yen has a ways to go yet. The last, and only time I was in Japan, the dollar got 300+ yen. I still have some 1000Y notes I found under my mattress the morning after we left Japan. The hookers didn't get it all :)

Sun, 12/16/2012 - 15:14 | 3068982 Yen Cross
Yen Cross's picture

What really makes me laugh/ Japan is pushing JGBs to everyone, and there is demand? It get's better though...

 When you want to devalue your currency, selling bonds sort of defeats the purpose. If you have demand for your bonds, then you have demand for your currency, via 4x exchanges to purchase your bonds!  Go figure/

Sun, 12/16/2012 - 15:21 | 3068992 otto skorzeny
otto skorzeny's picture

I think JGBS is a better buy-if you listen to K Bass

Sun, 12/16/2012 - 15:53 | 3069044 Yen Cross
Yen Cross's picture

I wouldn't touch those things with a Whaling Harpoon/

Sun, 12/16/2012 - 16:12 | 3069090 earleflorida
earleflorida's picture

twenty years ago south korea opened-up its markets to the free world!

japan has never had an open market... and, in the last twenty years, japan has lost its electronics industry/ auto industry to south korea

hyundai/samsung et.el

Sun, 12/16/2012 - 18:44 | 3069408 lolmao500
lolmao500's picture

Once Japan goes kaboom, the world goes kaboom. Hell the whole world was going nuts over Greece with a GDP of $300 billion... Japan's GDP : $5.9 trillion...

Bring it!

Sun, 12/16/2012 - 21:10 | 3069757 Hedgetard55
Hedgetard55's picture

Nikkei to run higher like a scalded dog.

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