Abe Vs Bernanke: Why Japan's Yen Target Means The S&P Will Suffer

Tyler Durden's picture

This morning, in an understated way (of course) ahead of the G-20 group-hug at the end the week, Economic and fiscal policy minister Akira Amari stated "It will be important to show our mettle and see the Nikkei reach the 13,000 mark by the end of the fiscal year (March 31)." This level for the Nikkei implies a USDJPY level of 104.75 (or a further 12% devaluations for here). However, there is a strong correlation between the USD-JPY exchange rate and the S&P 500-to-Nikkei 225 relationship. Based on that 104.75 target (and the toungue-in-cheek belief that this will help Japan's competitiveness - which means someone else has to suffer), the ratio of the SPX to NKY would be 8.7x. So while the Nikkei would see a 17% surge (in nominal value), the S&P 500 would lose 3-4% from here. 

Amari (and implicitly Abe) want 13,000 by the end of March - which is simply a Birinyi-Ruler linear extrapolation of the current move - this implies a USDJPY rate of 104.75...


and a USDJPY rate of 104.75 implies a NKY to SPX ratio of 8.7x...


which leaves the S&P losing as the NKY wins big.


It would appear that while Bernanke and Draghi prefer to lookon happily at their nominal market improvements, the Japanese seem to not give a toss that their policy is so explicitly about raising the nominal value of their stocks:

“We want to continue taking (new) steps to help stock prices rise” further, Amari stressed, referring to the core policies of the Liberal Democratic Party administration — the promotion of bold monetary easing, fiscal spending and greater private sector investment.


Not everyone can win in global currency wars.

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Mr Lennon Hendrix's picture


If the Matrix taught me anything it is that the power system can't look to good or else people won't believe it.  I wouldn't be surprised if the Fed has it's Prop desk let a 5% correction happen here.  Then a few thousand boomers will cash out their 401ks, buy new Toyotas, and miss the next nominal rally.

Upward is the new forward.

Say What Again's picture

Abe said; “We want to continue taking (new) steps to help stock prices rise”

Hey you moron -- Why don't you stabalize your economy?

EnslavethechildrenforBen's picture

 Printing paper currency is forced wealth confiscation. Basically turning the global economy into a radioactive mutant wasteland with all the wealthy cockroaches all huddled together fighting over rotten putrid guts and blue cheese puke while the rest of just us eat plain ole shit.

Human primates are pathetic.

Cult_of_Reason's picture

Bernanke (or Abe) declares a single tulip bulb should be sold for more than 10 times the annual income of a skilled craftsman. The hedge funds load up on dirt cheap leverage and bid the price of tulips up. All of us feel richer; spend like the drunken sailors, and it results in job creation. The unemployment problem is fixed!

Free markets and price discovery mechanisms are no longer needed. The monetary gods decide where asset prices need to be in order for people to feel wealthy and spend.

Bay of Pigs's picture

Sounds like reasonable and sustainable policy.

<sarc on>

disabledvet's picture

This actually sounds like how the policy was made. You know "imagine if someone made a snide remark and it became QE forever."

Cult_of_Reason's picture

I disagree with Tyler ("the NKY wins big").

Without the actual money printing, naked verbal intervention is unsustainable and will actually backfire (the hedgies will unwind their trades as fast as they piled into this overcrowded one-sided NKY momo ramp).

For example, the analysts were able to pump AAPL to $700, but the stock did not stay at $700 (AAPL did not win big).

Manthong's picture

I can’t believe that we are seeing the economic management of the third largest economy in the world saying that they are going to force “policy” to levitate their stock market 17% within 6 weeks and the world is not going apoplectic at that degree of desperation, arrogance and evil.

WTF am I missing here?

Orly's picture

Only that it ain't gonna happen, that's all.


Manthong's picture

Well, I’m taking Brian William's advice and running out to the liquor store..


EnslavethechildrenforBen's picture

I'm investing in Colombian hookers.

thismarketisrigged's picture

fuck u japan and all of asia. u guys make our markets look somewhat normal ( and that is extremely tough to do).


worry about your economy stabalizing you fucking bastards and not pumping up your market to make it look like all is good when the reality is we are all fucked

chump666's picture

Japan has pissed off all it's Asian trading partners.  This is a prelude to a war trade, Abe devaluation is of the YEN is an isolationist move.  Any country that does that blatantly is preparing for war.  Not hunting bandits in some desert somewhere, but a proper stand up fight.

if Japan is the first country to go from the central bank/goverment devaluation of currency to war, their stocks will collapse and bonds will go bid.  China could blockade Japan easily, cutting off India, Vietnam, Taiwan and South Korea.


Freddie's picture

Here are some patrol boats for the Phillippines:


Poor Japan. My guess is the (South) Koreans still hate them so they will not ally with Japan.  Choomwagen has sold out Japan.

Orly's picture

There's a huge bull trap forming on the GBPJPY pair, H1.  Watch out...

chump666's picture

You could be right the GBP hedged trades are against the Brent price, since pulled back.

Yeah I think the Japan/China tensions is going to go hot.  For me that is the correction trade, major one this year.  Might be sudden though since the QEinfinty glories are still resonating.

Orly's picture

Lots of reasons to now trade yen crosses short.  A hot war would certainly be one of them.  They are all massively overextended and I'ver heard people long UJ from 75 that are getting twitchy.

Also, the Pound Sterling is floundering here and looks to be severely injured, needing just one good push to get the downside moving.

That's why the GJ could be the trade of the year but Pound crosses have been known to take your head off- both ways- in the same fifteen minutes.  I have a blow-off top to 148 and that just might start a cascade of yen pair selling and all-around "risk off."  It could come as early as tomorrow, so keep your eyes wide open!


Freddie's picture

What about the S&P 500?  Tyler saying it will go down because of Abe's actions but the S&P 500 never goes down.  I think PResident Choom signed an exec order.

What do you know about the S&P 500 Orly?

Orly's picture

No more than you do, I am afraid.  But the currency pairs I follow are behaving as though a reversal could be coming shortly, meaning that the traditional "risk" pairs, such as the USDJPY could be in for a correction.  It has moved in a parabolic arc for several months without a retracement.

There are also sellers lined up in this zone to sell Euros for dollars, even though you may hear that the commitment of traders is still majorly long EURUSD.  The buyers are much higher in the range, though, and that leaves this zone susceptible to a sell-off.

The Pound Sterling is also hurting pretty badly and can't seem to keep its legs under it.

All of this means that the ramp in global equities may be coming to an end for this go-'round.  How far they fall is anyone's guess, as the Fed has a magical "Squelch the VIX" button that it uses on a regular basis. The robots read that and buy the market because all is well...until it isn't.

I am just saying that a supreme amount of caution is in order here for risk in general, including SPX, PMs and anything that is not a trusted bond. like USTs.

There's just too much stuff out there that looks really shaky.  Take that for what it's worth.  Now, you may see an exuberant top here, too, but don't let that fool you.  Keep your eyes open.


Addo: About the SPX/NKY ratio, I believe the author is talking on a relative basis.  Either way, three percent is not exactly a huge number.

chump666's picture

For me the S&P topped out at 1450, what is going on now is the retail fleece, as Tyler has pointed out.  So, buying in now would be risky. Also volumes are thinning drastically which means, maybe a top at 1500

It has been a bubble rally, no major collapse in the 30yr, but there was a slight scare, then it went bid a few weeks back.  A lot disconnect trades, oil is bid while stocks are now consolidating.  So we could have a war/tensions/safe haven trade very soon if money pour back into bonds and havens.

Someone is going to make a killing when this reverses.  I might just get a couple of bottles of good spirits and some change left over.

Freddie's picture

Thanks Chump & Orly.   There is a good video with Ray Dalio, Stephen Schwartzman (Blackstone?) and that little schmuck who worked for Carter (David Rubenstein) back around December 12.  Ray was saying mid to late 2013 on bond market.   He said it will affect every asset class.  

I think Rubenstein said the person who shorts bonds at the right time will cleanup.  If they jsut edited to Ray's 5 to 7 minutes it is worth it.



Doing some verticals like 1575/1585 or so but this sh*t just keeps creeping up.   No way I want to put a bottom side for a condor. 

The Bernank has said the S&P only goes up.

Maybe if someone found some rope, a lamp post and Krugman.  ;-)

chump666's picture

I think there are twitchy trades across the board.  The market (equities) has been thin post the risk on melt-ups.  So it is leveraged up pretty hard on the euphoric stage.  The great rotation is the laughable spin from Wall Street, it's easy to see that the DXY being bid means no major bond sell off took place at this point in time. As for GBP/JPY, I'd be careful on a short, you have the 50 crossed now over the 100 (1hr chart), plus the HFT 5day is supported.  But yes, war would send the crosses down hard and everything else, cept for gold and oil and USDs.

At this point I am still watching Asia/Europe opens for risk off, Dow and S&P need over 2% neg for the correction to begin.

Orly's picture

Like I said, it is a bull trap formation, so I am not short now.  In fact, I have a robot running long until ~148.

We'll see then how much of the gold price is factored in as spec and how much is safe-haven.  I have a feeling the specs are longer than people think.

Best of luck, Chump!


chump666's picture

Got it re: bull trap.  I agree, now short term on Nth Korea/China antagonizing Japan

Get the bomb news? funny the USD starting selling.  Robots and Asia seem oblivious that war tensions are terrible for equities and risk.  I think the Nikkei run and YEN could near to over on the nuke test and the after effects, I would 100% lock in a Japan getting very frisky now.

good luck to you too


tight old school metal jam

Orly's picture

So that's what happened to my trap formation.  Same effect, just speeds it up a bit...

chump666's picture

Japan is cycling through it's history again, first stop maybe this Russo -Japan war: http://www.historynet.com/russo-japanese-war-japans-first-big-surprise.htm

Freddie's picture

Wow. Everyone should read that. The big deal is it talks about how banksters invest in wars. Yeah we suspected or knew it but I rarely have seen it in print.  The banksters lined up behind Russia until Nippon started kicking some ass.  The banksters just want a good return on their investment. 

Just like the banksters in Europe who made a bundle off 1 million dead in the U.S. civil war.

Nid's picture

Was this the signal to Ma' and Pa' Wang to go all in?

Pearl Harbor baby!

Tsar Pointless's picture

Oh noes! Three-to-four percent off the S&P?

The world - she will come to an end!


Rusty Shorts's picture

Global Debt And The HUMAN BUBBLE. By Gregory Mannarino


eddiebe's picture

I don't believe what any of those freaks say.

Wm the Shrubber's picture

There is absolutely no pretense surrounding policy at this point.  Outright monetization/devaluation specifically to lift the stock market as if this were a proxy for economic progress.  If this works for Japan, why not have all CBs get on the band wagon and brazenly pump global markets without reservation or qualification?  They know that they are above any/all reproach, much less something resembling the rule of law.  Further, the overwhelming majority of populations either are too stupid to understand, too jaded to care, or too resigned to the coming deluge to fight.  We are witnessing the slow motion destruction of free market capitalism, the decline of western democracy, and the end of the American empire.  As with Rome, it won't fall in a day, but dark ages are coming!

rubearish10's picture

Remember, the US has been doing this for quite a while now by managing the USD/Yuan peg. Presto/Chango, you have S&P1500/DJIA14,000, end of story.

Squid Vicious's picture

didn't we drop two bombs on those people? what was in those things, fertilizer??

Aunty Christ's picture

I am mystified that the S&P is up so much considering our exports are bound to suffer by this blatent Yen devaluation scheme. Even more surprised that everybody thinks GM and Ford are going to do well against the Japanese car companies...

Freddie's picture

I think Oba signed an exec order that the S&P 500 cannot go down in anyway.



Atomizer's picture

Derivative monetary architects


Guess who is shitting bricks on bad Central Planning Policy’s? Thanks to RIOT, anyone can find them.


rubearish10's picture

Boy, I wish I had all I wanted. Didn't realize it was this easy. 

Atomizer's picture

The current monetary system is extremely fragile. The Jim Cramer’s of the world just lure you to the table to make a quick bet. The term investment has been destroyed by these three card monte types.

rubearish10's picture

BUY! BUY! Then Bye-Bye!

azengrcat's picture

Ah yeah, full printard!

besnook's picture

hilarious! the fed props up the spx with trillions of dollars of fresh moola telling the world they are saving the world but as soon as someone else takes off on the same course they are destroying the world. there are some interesting parallels to pre ww2 but i think the japanese will skip pearl harbor and go right to a financial fat man on the dollar if pushed.

Lord Of Finance's picture

Abe vs Bernanke






Hitler vs Stalin


Lenin vs Shaw


Douglas vs Tyson


Kramer vs Kramer


Cramer vs Kudlow



Joe moneybags's picture

I'll take Shintzu Godzilla over Ben Mothra on this one.