Citi Explains Kuroda's Dilemma: "Please Sell More Yen Cause I Can't"

Tyler Durden's picture

Via Citi's Steven Englander,

In WSJ interview: “He described the U.S. economy as "recovering very strongly" and stronger than Japan, saying that should not result in a higher yen. "In this kind of situation, I don't think it's reasonable to expect the yen to appreciate against the dollar." And “when the time came for the BOJ to withdraw its easing measures after having achieved its stated price goals, he didn't expect the yen to rise. "I really don't think the yen should appreciate even in that situation”.

Kuroda is telling investors not to buy JPY just because the BoJ is being very reticent on  policy ease. This week’s Nikkei dip below 14000 and JPY below 101 were likely viewed a s very negative developments, given the headwinds that the sales tax increase will generate. Hence the strong effort here to draw a line under the JPY, and delink it from monetary policy.

There is an important  second message which is intended to be delivered to the Japanese bureaucracy --  “But Mr. Kuroda also acknowledged limits to what the BOJ can do to generate long-term growth. "Unless (Japan's) growth potential is raised, the end result may be only the 2% inflation target achieved but real growth is meager," he said. "That is not good." … Mr. Kuroda used his strongest language yet to urge Prime Minister Shinzo Abe to take advantage of the continuing economic recovery to quickly carry out promised overhauls aimed at bolstering growth. “

There has been considerable disappointment in the third arrow and quite correctly BoJ Governor Kuroda is emphasizing that you can have just as mediocre an economy with 2% inflation as with 1% deflation. The major Japanese structural reforms have been pushed further into the future, and the BoJ (in common with the Fed) is being expected to deliver a solution to deep-seated structural problems with easy money. The BoJ is pushing back against this, and is probably afraid that to give a further does of monetary ease without something being delivered on the structural front.



Bottom lines:

1)      Every CB gets a couple of shots at talking down its currency without changing policy – then the impact shrivels.  The BoJ probably has one or two more bites at this apple, but the impact will likely be falling


2)      If they are really as reticent on delivering near-term policy ease as they sound, they will need some help from Japanese portfolio outflows to get JPY weaker. There is speculation that pressure on Japanese semi-official institutions is increasing.


3)      Japanese officials are very much looking on the bright side of life when it comes to incoming data, but we have yet to see the full brunt of the sales tax increase and it will become increasingly difficult to spin bad incoming data.

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fonzannoon's picture

anyone remember when santelli was worried about the nasdaq breaking under 3,996? this market is a beast.

ZerOhead's picture

So the guy who wants the value of the Japanese yen to corrode is called Mr. Kuroda... you just can't make this shit up.

Wonder what's going to happen at the Fed when TSHTF...

LawsofPhysics's picture

"Wonder what's going to happen at the Fed when TSHTF..." -

People have been wondering this for over 100 years, and yet, here we are...

sessinpo's picture

ZerOhead     Wonder what's going to happen at the Fed when TSHTF...


They'll be Yellen

whatsinaname's picture

Gives true meaning to the word Juggernaut - which came from the Sanskrit word Jagannath !!

CrashisOptimistic's picture

Why be impressed by quickly delivered 1s and 0s?


Hindenburg...Oh Man's picture

seriously. it has gone completely the opposite direction ever since that rant. The low volume melt up on the NASDAQ 100 has been the real story today (more so than 1900 on the S/P). It's almost as if the NASDAQ 100 is a double or triple leveraged ETF rather than an index. 

buzzsaw99's picture

prease no buy yen we no likey

TheRideNeverEnds's picture

I just bought a shitload of yen @ 101.97 cause I couldn't wait for it to trade even and I am bored as shit just watching every fucking thing go straight up day after day.


Hindenburg...Oh Man's picture

Why don't they just double or triple their printing output? seriously. problem solved. 

Ungaro's picture

What I don't get about this market is the super low volume while hitting record all-time highs. At this rate the markets will spike on a total of 17 shares traded with every (non-inverse ETF) issue on the NYSE hitting all-time record highs... It moggles the bind.

Hindenburg...Oh Man's picture

NasDAQ e-mini 100 futures are up .78 percent as I type. un-fucking-real. At this rate we will be up over 100 percent return this year (if the past week is a guide).

Hindenburg...Oh Man's picture

to your point: if no one is selling, and all it takes is such low volume to constantly jack the market (example: see today's NASDAQ), what keeps this year from being 50-70 percent return? 

Ungaro's picture

One cannot realize gains without selling. Someone, sometime has to say, "I'll take some of those gains off the table." Then there is selling. But I see no evidence of that, not since Sep. 2011 -- we have not had any kind of correction.

Yen Cross's picture

     Must have cheap yen to keep nominal(ponzi) PeNikkei stock values high. 

   Citi must be reading my posts.

bbq on whitehouse lawn's picture

Dont look at the market numbers as true numbers, look that who is selling it and to whom.
Banks sell protection and business is good.

8th Estate's picture

Now maybe someone can explain Draghi's version?

"If the Germans won't let me weaken the euro by printing it, maybe I can strengthen the dollar instead? Janet sure loves it when I buy T-notes through my Belgian Euroclear account"

Or is it just Vlad dumping dollars into Belgium in preparation for selling them?