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Presenting Abe's 'Super-Secret' Devaluation Plan - Double-Down

Tyler Durden's picture


Much has been made of newly appointed uber-easer Abe's plans to weaken the JPY by any means possible. Since the global financial crisis began in early 2008, USDJPY has tracked remarkably closely with the ratio of Federal Reserve assets to Bank of Japan assets - as the currency wars escalated. Assuming the Fed proceeds with its planned QE3/4 $1tn expansion, then BoJ assets would need to expand by around JPY100tn to meet this target. The current BoJ holdings of JGBs just crossed JPY100tn - so this new printing is double the current holdings and considerably more than double the planned JPY44tn purchases for the year. Good luck with that given the expected JGB issuance this year is only around JPY44tn and good luck persuading anyone that the BoJ is not directly funding the government in the ultimate reacharound. As the Fed monetizes 1 year of Treasury issuance so the BoJ has to monetize over 2 years of JGB issuance - sustainable?

The current collapse in USDJPY to 86 has actually recoupled with the
ratio at around 0.0184x (Fed 2.92tn / BoJ 157.833tn). This implies the market is priced for around JPY56tn of JPY printing already (25% more than planned); but, given the USDJPY
target of 90 that has been implicitly discussed, this would mean the ratio of
Fed/BoJ would need to drop to 0.0165x.

The recent drop in USDJPY has recoupled with the current Fed/BoJ ratio once again...


but given the Fed's grand QE3/4 plan, the BoJ will have to be very aggressive to weaken the JPY - obviously - though monetizing double the planned JGB issuance this year seems like a stretch for even Abe (if he hopes to maintain any semblance of market confidence).


Chart: Bloomberg

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Fri, 12/28/2012 - 12:20 | 3101799 francis_sawyer
francis_sawyer's picture

The plan is to continue to monetize until radiation levels are back to normal...

Fri, 12/28/2012 - 12:37 | 3101845 Cognitive Dissonance
Cognitive Dissonance's picture

Actually they think all that radiation might just create a new, stronger weaker currency by way of fiat mutilation mutation.

<Son of Godzilla.>

Fri, 12/28/2012 - 12:40 | 3101854 francis_sawyer
francis_sawyer's picture

Hayata! Hayata!

Fri, 12/28/2012 - 12:44 | 3101865 I am more equal...
I am more equal than others's picture

How many times can you hit Control-P before you wear out your fingers? 

There is inflation, hyper-inflation, super hyper-inflation, super duper hyper-inflation, and then really super duper hyper-inflation.  I guess the fingers wear out somewhere between super duper hyper-inflation and really super duper hyper-inflation. 

Fri, 12/28/2012 - 12:53 | 3101890 Cognitive Dissonance
Cognitive Dissonance's picture

No need to wear you're finger out anymore. They've got an iApp for that.

Fri, 12/28/2012 - 12:44 | 3101863 Ghordius
Ghordius's picture

I just heard a rumour that the Japanese plan to "floor" the Yen vs the Dollar

<creepy sound> enter the dollarzone <creepy sound>

Fri, 12/28/2012 - 12:18 | 3101801 Dr. Engali
Dr. Engali's picture

Stop issuing bank credits and just start tossing the filthy fiat out to the people. That will weaken the yen for sure.

Fri, 12/28/2012 - 12:22 | 3101811 CPL
CPL's picture

Put everything we do not have and double it on red.

Fri, 12/28/2012 - 12:44 | 3101861 knukles
knukles's picture

You know, that was the original concept of the "dropping money from helicopters"... into the hands of Joe Public... not via a transmission mechanism through the banks in the midst of a Liquidity trap... which by definition, cannot work.

Holy still waters, Batman!

Fri, 12/28/2012 - 12:21 | 3101808 Opinionated Ass
Opinionated Ass's picture

"Debasing the currency helps exporters" = bullshit.


Exporter wants to sell stuff cheap. Exporter lowers his prices. That was easy.


Central banker lowers his prices for him by debasing. Exporter has to pay his workers more so they can buy stuff to eat. That was stupid.


Oh wait, I left out the part: Central banker gets to spend the new money created out of thin air on his friends.



Fri, 12/28/2012 - 12:29 | 3101825 CPL
CPL's picture

Maybe they'll try Germany's plans.


Export the elderly to another country.  It's so fucking cold and mean I don't even have words for it.


Fri, 12/28/2012 - 13:04 | 3101913 Bindar Dundat
Bindar Dundat's picture

OpinASS -- you are so right!

Has anyone ever seen a strong economy with a weak currency?




Fri, 12/28/2012 - 12:21 | 3101810 Al Huxley
Al Huxley's picture

Is this really a problem?  Japanese government pays all its citizens 'X' yen, in order to double its deficit, thereby providing the BoJ with the necessary debt to monetize.  Seems like a win for everybody.  This MMT shit is easy...

Fri, 12/28/2012 - 12:28 | 3101824 CrashisOptimistic
CrashisOptimistic's picture


Look, guys, this isn't rocket science.

Japan oil consumption per day = 4.8 million barrels

Japan domestic oil production = 0

Brent pricing of $110 -->  4.8 million X 365 X $110/barrel = $192 billion/yr

Japan GDP $5.86T

They are thus draining 3.3% of GDP out of the country each year to pay for oil.  They would kill to have 3.3% growth, and they never will with that headwind.

Fri, 12/28/2012 - 12:33 | 3101837 buzzsaw99
buzzsaw99's picture

correctamundo. trade deficits kill (including world) economies.

Fri, 12/28/2012 - 13:05 | 3101918 francis_sawyer
francis_sawyer's picture

Of course they could solve the need to import oil by driving 'plug-in' cars & building nuclear facilities to supply the power needs for those... Oh wait...

Fri, 12/28/2012 - 13:06 | 3101926 Glass Seagull
Glass Seagull's picture



Japanese remilitarization will provide an extra conduit for all the new yen.

Sat, 12/29/2012 - 00:04 | 3104143 BigInJapan
BigInJapan's picture


Frontrunning that will be the trade of the decade.


Fri, 12/28/2012 - 13:31 | 3102042 ZFiNX
ZFiNX's picture

Currency wars are speeding along nicely. Real war soon.

Fri, 12/28/2012 - 16:24 | 3102738 Diesel Seven
Diesel Seven's picture

Dog logic tells me to buy the Nikkei 225 with yen exposure hedged . . . stock love printing, especially when the CB is buying the market . . .

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