The Immovable Object In The Path Of Abe's Unstoppable Reflationary Force

Tyler Durden's picture

Day after day, just after the US day-session close - just as traders settle down for some Ovaltine and light reading - someone (anyone) from Japan's political or financial elite sends a shot across the wires on the epic amount of easing that they will do to fight deflation. Explicitly focusing on the stock market, with the economy 'hopefully' coming along for the ride, is the cunning plan to inflate asset values into a self-fulfilling cycle of awesomeness for the structurally deadbeat Japanese economy. So far so good - given JPY's weakness and NKY's nominal rise. But loathed as we are to steal the jam from Abe's donut, there is a rather large fly in his inflation ointment - Brent VigilantesTM. Today saw the price of oil in Japan rise to its highest since September 2008. Anytime the price of oil has topped JPY10,000 per barrel, Japan's macro-economy has slumped. Just as we noted earlier, there is simply no free lunch in the competitive devaluation game - as the market's only self-regulating force remains in the price of energy.

The price of crude oil in JPY has surged (as one would naturally expect) as JPY has been devalued...

 

this implicit inflation has historically had a significant impact on Japan's economy...

 

So just as they see the nominal price of their stock market zoom Zimbabwe-like to the moon on the back of an ever-devaluing currency, so the people and corporations of Japan (well those that need energy in any way whatsoever) have their pockets picked and margins crushed...

 

Charts: Bloomberg