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USDJPY Nears 2014 Lows As Goldman Warns Economic "Downside Risks Are High"
Hot on the heels of last week's dismal Japanese data, tonight's Industrial Production data missed rather dramatically as once again the hockey-stick'ers of hope rebound from last month's post-tax-hike plunge did not appear. USDJPY is still fading (4th day in a row), as Goldman concludes rather ominously (having folded like a lawn-chair on their J-Curve exuberance), the post-tax-hike correction is larger than the government and the market anticipated, and in view of our outlook for a slump in real wages and a resultant delayed recovery in domestic demand, we look to external demand to drive economic growth in FY2014. However, we highlight risk factors in the form of protracted weakness in China and other Asian economies and a decline in corporate Japan’s structural export capacity. Sadly for the hopers, hard data continues to miss both the production survey forecast and consensus.
As Goldman notes,
May production turns up, but short of consensus: Industrial production increased 0.5% mom in May (April: -2.8%), in line with our forecast but short of consensus (+0.9%) and well below the production outlook (+1.7%) announced together with last month’s data release. The upturn in production was widely anticipated given the sharp decline in April on the dropout of rush demand ahead of the consumption tax hike. However, the output trend is weak mainly because of sluggish export production, and the headline figure continues to miss both the production survey forecast and consensus. The government maintained its assessment of industrial production as “appears to be flat.”
Among the demand components, production of consumer durables picked up to some extent with 1.7% mom growth in May, having fallen 4.0% in April. Production of capital goods fell again in May, by 2.3%, while production of construction goods shrank 4.6% in May, versus 1.5% growth in April. By industry, output rose in the transport equipment sector (May: +1.9% mom) and the machinery sector (+1.9%), but decreased in chemicals (-4.5%) and information/communications equipment (-9.3%).
Output growth projected for Jun-Jul, but we still see high downside risk: The production outlook for Jun-Jul, announced together with the May data, calls for a small increase in output over the two months, with a 0.7% mom decline in June and 1.5% growth in July. However, we continue to see high downside risk due to (1) continued sluggishness in export volumes, (2) a slower-than-expected pace of recovery in consumption-related indicators after the April tax hike, and (3) many recent cases where production has undershot the survey forecast.
Post-tax-hike correction may be slightly exceeding expectations: On the whole we believe the post-tax-hike correction is larger than the government and the market anticipated, but more or less in line with our expectations. In view of our outlook for a slump in real wages and a resultant delayed recovery in domestic demand, we look to external demand to drive economic growth in FY2014. However, we highlight risk factors in the form of protracted weakness in China and other Asian economies and a decline in corporate Japan’s structural export capacity.
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USDJPY is not happy... and carry traders begin to lose faith...
As we noted previously, Abe's actions are nothing but a mirage:
Abe’s arrows have been praised in the media by the economically ignorant, the politically motivated, and those who believe prosperity is parceled out by some all powerful shaman. However, the arrows, seen in the harsh light of reality, turn out to be counterfeiting schemes, “investing” in money losing ventures, taking money from the productive, and squabbling with the neighbors. These counterproductive political actions won’t ever result in a stronger economy and have instead left the Japanese people with a crushing debt and tax burden. Don’t get taken in by the hogwash you read in mainstream media propaganda pieces. Abe’s policies are complete and utter failures.
It appears Goldman is joining the choir (along with BofAML).
And remember - inflation is at a 20-30 year high (depending on how one measures it) so don't be expecting moar QQE
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Been hearng something about July 15 where there will be some form of announcement or action that gets the ball rolling into a new paradigm.
Dunno as time stamping anything is flawed for the most part, but will watch the headlines for anything unusual.
The real downside risk is revolution.
Britain's poorest pay more tax than the richest? You think that'll go on for long?
http://www.planbeconomics.com/2014/06/broken-britain-poorest-pay-more-in...
Everybody pays more than the rich. Inflation is the insidious tax that hurts the most. The further away from the printing presses you are, the worse it is.
but I thought this was (another) recovery summer ? ! dang, I'm really confused . . . . .
Homeland Security bought green bullets. Lots of green shots in our future.
You're not just whistling Dixie.
https://inspira.un.org/psc/UNCAREERS/EMPLOYEE/HRMS/c/UN_CUSTOMIZATIONS.UN_JOB_DETAIL.GBL?Page=UN_JOB_DETAIL&Action=A&JobOpeningId=34627&
http://freedomoutpost.com/2014/06/un-disarmament-americans-goal-stand-america/
The Yen is dead. Long live the Yen.
Wei Tu Lo!?!
Hollow points are for target practice on no hesitation targets.......
http://c.washingtontimes.com/neighborhood/high-tide-and-turn/2013/feb/28...
no payroll and sales tax and all sorts of mandatory auto and other insurance ( shadow taxes ) .
it's not just inflation . it's real taxes. it's definitely both.
Local taxes have been growing at an astronomical rate, state-level taxes only slightly less astronomically. Off of a low base in most cases, but still the percentages are eye-watering. My township taxes (not including school taxes, unfortunately) went up 122% in 2 years before we threw the bums out of office and flattened the curve to zero. We're now looking at rolling them back, but it won't be back to the original rates, even if we get our way.
It's a ratchet that only moves in one direction. Up.
I sit in awe at the endless nonsense spewed by these folks.
Nobody, of course here at the Hedge, ever thought that tax increases, etc Abenomics etc, would slow their economy...
I mean Fuck Me with Somebody Else's Spoon
This is like being paid to tug off on a webcam.
what about this guys spoon?
https://img0.etsystatic.com/039/0/7504859/il_340x270.536605428_qfu3.jpg
July 17th/18th is the ECB, with possible bond buying. Timing something from Japan, to go with it, would be a pretty big change.
GOLDEN.
Massive big downside risk on, tiny little upside left for the muppets..
we are watching from the bottom up but hey imagine being them
I'm sure the bankers are well positioned, and if they aren't the public treasury is close at hand.
In theory you could try an LBO.
"Of the Entire Country."
The USA does have the expertise in "nuclear deconstruction, containment and ulitmately decommissioning." So as with East Germany after the Soviet Union collapsed so the USA could simply..."buy Japan."
It's not like they're going to be invading anybody anytime soon...and China looks on the verge of flying apart here. We'd need a port somewhere so we could start off loading the largesse. Teams of scientists and engineers. Access to Japanese heavy industry...and the bank roll.
Just to let the Americans in would cost 100 billion up front. Still the alternative is "lose Tokyo." Relative to that sounds like chump change actually.
Diminishing returns abound.
how quaint and utterly irrelevant. goldman going through the motions, acting as if anything fundamental matters at all. if abe and kuroda say the yen is worth less than a penny then by god that's where it'll stay. no way in hell wantanabe ever gets a margin call due to strength in the yen. the squid just wants you to sell something, anything. the japanese say please do not worry, the squid says please worry. i know whom i believe.
Who do they have on the other side of the trade? The Fed?
This will end badly for Goldman.
New word for ZH'ers:
"Gacha"
http://www.serkantoto.com/2012/02/21/gacha-social-games/
A Japanese phenomenon and perhaps an interesting insight into the culture.
Be sure to NOT tell any flunkies in the Gubbermint or they will certainly use it to find a way to extract more wool from the Sheeple - more than they already do with state lotteries.
Thanks but no thanks BOA and GS...I'll stay short the JPY...I call it my Kamikaze trade.
A warning from Goldman? Gimme a break.....
I concur........fuck goldman.....long and hard, with no lube.