Foreigners Dumped More Japanese Stocks This Week Than Ever Before

Tyler Durden's picture

USDJPY just had its best week in 2 months, funding bullish momentum and carry trades around the world in the midst of dismal economic data everywhere and tumbling earnings expectations. This "bullish" Yen strength, however, amid China's biggest weekly devaluation in almost 3 months, was ironically driven by drastic investment outflows - record sales of Japanese stocks by foreigners (sell JPY), and record purchases of foreign bonds by Japanese investors (sell JPY). Sooner, rather than later, it is obvious that the investment outflows will dominate the carry trades (see Thursday and Friday) and Kuroda and Abe will have a major problem.

Yen was dumped all week...

 

Which provided just enough juice for carry trades to lift Japanese stocks (despite the weakness in data and China's biggest weekly Yuan devaluation in almost 3 months)

But notice that the last two days have seen Japanese stocks decouple from USDJPY, perhaps the first glimpse of the investment outflows overwhelming any casino-based carry trades flows.

And this is why... Foreigners sold a record amount of Japanese stocks last week... (implicitly meansing Yen was sold)

 

And Japanese investors fled the insanity of record low yields in JGBs, buying a record amount of foreign bonds last week (implicitly selling Yen again)...

 

So the Yen weakness - which was so bullishly supportive of global equity markets via carry - was in fact a signal of massive investor anxiety fleeing the sinking ship. Peter Pan-ic indeed.

Abe and Kuroda will soon face a major problem as a weaker Yen will signal the exact opposite trade that has been so active since 2012 - weakness means weak Japanese economy means sell Japanese assets.. and we will soon see capital controls in the world's largest debtor nation.

And remember - the devaluation of The Yen has done nothing - NOTHING - to improve exports for Japan...

 

“The tailwind from the weak yen has gone. We can’t help but hold a pessimistic view on the outlook for exports,” said Atsushi Takeda, an economist at Itochu Corp. in Tokyo, said before the figures were released. “Domestic demand won’t be dependable at all, and the same goes for exports. I can’t deny the possibility of another economic contraction this quarter.”

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debtor of last resort's picture

Currency war high school dropout. Mrs Watanabe should accumulate more debt for Hello Kitty handouts.

philipat's picture

Please set me straight on how "The best week in 2 months for USD/JPY (That is USD strength and JPY weakness" equates to "This Bullish Yen strength"? And if Yen weakness continues, isn't that eaxactly what Messrs Abe and Kuroda want?

Mr. Ed's picture

Yes, I would not call the author of this post a currency expert...

try_it's picture

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shantyman's picture

So how does this correlate with the Horseman article??  

http://www.zerohedge.com/news/2016-03-24/when-does-us-stock-bubble-burst...

Both claim to be tanking the Nikkei, which according to Horseman will tank the S&P......but one has a strong Yen causing the problem, the other a weak Yen....

Janet Shalom Bernanke's picture

The implosion of Japan can't happen to fast for me.  I want to see Tokyo in flames, and their asshole central bankers dead or in prison.

The people there will wake-up when it is too late.   

 

It will be a big awakening for the world as well. because the U.S. and Europe are close behind them.

Fiat meltdown coming.  Yen first

 

 

Caviar Emptor's picture

It's all tied to fundamentals. You wouldn't understand

philipat's picture

Ah fundamentals. Now that you come to mention it I do vaguely recall fundamentals from before the age of Central Planning.

In this latest demonstaration of fundamentals, Japan is fucked so the Yen should be falling, especially with Abenomics. However, the US is also fucked so the USD should also be falling and Gold should be rising. Now, where were we, oh yes, fundamentals.....

Aaronson.Jones.Rutherford's picture

Yen was not sold all week. Dollar was bought all week that's all.

jldpc's picture

Come on...the game is afoot......Jap CB voluntarily marks all of its gazillion JPG bonds paid in full; and transfers all of its stock holdings to Jap Central Government and staff resigns and retires - job well done. Government runs a positive balance sheet, USDJPY skyrockets, and the Central Government sells new bonds paying 4% interest - overwelmed with the inflow of gargantuan funds from all over the world - no credit risk here; offers easy credit terms on government financing of sales of all Jap exports - better than 4% below cost of goods, and zero percent cost of funds. Then wait for one year, and start the game over - devaluation of currency for another 3 decades. Who can or will stop them? There are many ways to play the game - none more crazy than another. Now that the "Business Judgment Rule" is gone; and prudence is gone forever from goverment officials and corporate/banker executives - who cares? Who can stop them? Not you!!!

pachanguero's picture

USD is going higher for all the wrong reasons.....

Seasmoke's picture

And for some fucking reason the paper price of Gold follows the JPY.

philipat's picture

It's back to the old carry trade, sell Yen Short Gold and VIX, long USD/Stawks.

misalkin's picture

Didn't JPM start to sell its commodities at least: gold,silver, copper, aluminium? 23-03-2016

I though that was the reason,

Amish Hacker's picture

These tight correlations indicate only that markets have been corrupted by HFT. Smash the Yen (or the VIX), and the S&P goes up. This has worked reliably for years.

The other correlation is between gold and the Yen, in place since at least 2006. If that relationship is reversing, as the article suggests, then the coming JPY collapse may herald a more honest USD/AU cross.

Baronneke's picture

All the big Central Banks are rigging and manupulating the markets worldwide.  Is it not for interventions in de FX markets, then it is for the plunge protection teams propping up prices or Central banks buying assest straight on the markets.

Their will 1000% sure be a time when more and more people want buying this bullshit anymore and will start selling massivly, just like the so called smart money is doing for some time now.  This will cause markets all over the world to panic and the outcome will be crashes all over the planet, this is just a matter of (very little) time.

I prepared to hold some cash and some silver, just in case, as I don't trust the financial markets for one bit.  And as far I am concerned........they should hang Draghi, Yellen and Kuroda for they are frauds beyond reognition.

 

I sure hope ZeroHedge readers have prepared themselves.  Wishing you all the best in the coming months as we will all need it.

 

Best regards:  LeBaron

philipat's picture

However, the CB's and their Agents (Owners) the TBTF's represent about 70% of the volume traded in all "markets". Nobody in that Cartel is going to pull the plug until it is agreed to do so. So don't hold your breath, this shit show could continue for some time yet, unless one of them makes a mistake, which could translate through "markets" in Milliseconds, thanks to our friends the "liquidity providers".

toadold's picture

Golly gee, if the contrarian model is correct then we should be buying Japanese Stocks?  What could go wrong?

JackBeTrader's picture

Strong USD actually, but what do I know. Only this week however. If you look at two weeks basically nothing has happened.

Everyone should read this article,

http://www.zerohedge.com/news/2016-03-24/when-does-us-stock-bubble-burst...

If you don't like to read them just look for the two charts of Nikkei / S&P correlation and the S&P priced in Yen terms. We have a divergence right now and then two should converge, weaker Yen or Lowe SPX..

I expect Kuroda to unleash all hell against the JPY soon to weaken and spark stocks. I would (and have) bet on a weaker Yen.

lucky and good's picture

Some of this action is getting hard to follow. Still it is getting more difficult to ignore that Japan is facing a mountain of debt that can only be addressed by printing more money and debasing their currency. This means paying off their debt with worthless yen where possible and in many cases defaulting on promise.

Japan is stuck with an aging and shrinking population that with each day becomes more expensive for the government to provide for. Simply put, the fundamentals for Japan are lousy. More about this in the article below.

 http://brucewilds.blogspot.com/2016/02/japan-is-falling-into-economic-abyss.html