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JPY Intervention, $512bn Losses Well Spent?

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Wed, 11/02/2011 - 03:29 | 1835889 NewThor
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They're going to need a bigger boat to float next time, Bitchez !

Wed, 11/02/2011 - 04:47 | 1835947 AldousHuxley
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The Bank of Japan adopted a new monetary easing framework in March 2001. Based on this, in a situation where there is little room for a further decline in short-term interest rates, the effects of monetary easing will necessarily be limited. The fact that economic activity has not been stimulated despite an aggressive increase in reserves
since March 2001 seems to be consistent with what such standard theory predicts.


from "One Year Under 'Quantitative Easing' " (2002) authored by Masaaki Shirakawa, central banker and the 30th Governor of the Bank of Japan (BOJ). He is also a Director and Vice-Chairman of the Bank for International Settlements (BIS)


Bernanke, are you listening?!!!

Wed, 11/02/2011 - 06:13 | 1835994 css1971
css1971's picture

Shouldn't that be "Twenty years under Quantitative Easing"?

Wed, 11/02/2011 - 06:47 | 1836017 bigwavedave
bigwavedave's picture

I think people miss the point. They can print money to buy other peoples money. Inflation in Japan hasnt existed for 20 years. Yes its all a fiat shell game but those USD or EUR that Japan is adding to reserves (and the trade balance) will come in handy.  

Wed, 11/02/2011 - 03:37 | 1835896 winter is coming
winter is coming's picture

Start buying pms and old Deutsche marks

Wed, 11/02/2011 - 04:12 | 1835926 PY-129-20
PY-129-20's picture

Still have some old Deutsche Mark. Looking at it with Sehnsucht (longing) as if it were an old love.

Wed, 11/02/2011 - 03:45 | 1835903 jmcadg
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Old DMs, good thought.

Wed, 11/02/2011 - 04:21 | 1835917 hambone
hambone's picture

spending "money" now that you never intend to repay in full or potentially at all...is that really money or simply state sponsored digital counterfeiting?

And how much is the ECB spending to defend EU debt?  SNB? 

And Ameria it's trillions to push rates down, buy T's, MBS.

No markets left, just interventions.

Wed, 11/02/2011 - 04:02 | 1835918 Coldfire
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It's not like the BOJ can't just issue more yen to cover their "losses". And they will probably do this well past the point where markets determine that the currency is being debased and start selling yen. Of course the market will end up taking the yen far below the level desired by the BOJ. And the BOJ will not be able to unprint the already issued money. The BOJ's - and every other central bank's - fatal conceit is that it is capable of being the supreme arbiter of supply and demand at all times for the currency. Of course, no central authority could possibly ever have timely access to the information it would need to determine the market clearing rate at all times. Pity the BOJ. They are trying to maintain their fractional reserve banking system Ponzi and debase their currency to goose export performance. You would have thought that debt/GDP > 200% and profligate money printing would be enough to debase the currency. Amazingly, so far, no. Trading on this expectation has been a widowmaker. But the BOJ is determined to get it right and they'll probably "succeed" and destroy the yen in the process. Pure monetary barbarism (via Berkeley, of course).

Wed, 11/02/2011 - 04:13 | 1835928 Western
Western's picture

I was going to ask, why isn't the BoJ just printing yen unlike their Zimbabwean/American counterparts.


Are you saying it's because the yen will overshoot and just become worthless?

Wed, 11/02/2011 - 04:54 | 1835951 UP Forester
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No one wants to use glow-in-the-dark shit-tickets.

Wed, 11/02/2011 - 05:12 | 1835962 WestVillageIdiot
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It seems that BoJ won't be happy until Americans can buy a Toyota for about six dollars.  How the hell does that make sense to anybody that isn't hepped up on mushrooms or just fucking insane? 

Wed, 11/02/2011 - 06:11 | 1835992 moneymutt
moneymutt's picture

What am I missing, if your currency is appreciating by a bigger a,out that you like, you just print money and spend it I the domestic economy on, say, cleaning up Fukishima, rebuilding tsunami ravaged towns. For an island nation, cost of imported raw goods is still reasonable but you balance that with the competitiveness of your exporters.

Only danger is over doing it, calibrating incorrectly. But with such a strong yen, that is less of a concern.

Wed, 11/02/2011 - 04:11 | 1835925 Snidley Whipsnae
Snidley Whipsnae's picture

Are there any real success stories in currency intervention; ie, over the long run?

All central banks are intervening all the time in the relative strength of their currencies through monetization (QE), interest rate targeting, inflation targeting, unemployment targeting, manipulation of commodities mkts, manipulation of equities mkts, manipulation of bond mkts, etc, etc, etc...

Has the system of central banks proven that it is a better judge of anything than Mr Market?

All that I know for certain is that the US Dollar now buys about what a nickle bought in 1913.


Wed, 11/02/2011 - 04:23 | 1835932 LuKOsro
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Of course there are no succes stories in the recorded history of currency intervention.

Wed, 11/02/2011 - 05:13 | 1835964 WestVillageIdiot
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How do you think the Rockefellers, Astors, Rothschilds, etc. would answer that question?  Just ask Hank Paulson or Bernanke.  You would probably get a different answer. 

Wed, 11/02/2011 - 04:24 | 1835934 Temporalist
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The currency manipulation is not in a vacuum and these manipulators clearly don't care about the unintended consequences.


A Short Time To Go, For A Global Economy Far Far Debased

Currency Wars

Wed, 11/02/2011 - 04:12 | 1835927 bob_dabolina
bob_dabolina's picture

I get your point but the Japs are gona' protect their exporters. 

A good short would be /es @ 1265

Wed, 11/02/2011 - 04:22 | 1835931 Mike2756
Mike2756's picture

Might get there by the open, looks like everyone is front running he-who-has-to-print.

Wed, 11/02/2011 - 04:27 | 1835936 acttang
acttang's picture

I actually disagree with JPM analysis entirely. Japan being a nation awash in public debt, it has all the incentive to monitize this burden. If they could print trillion up trillions, they would substantially increase the supply of yen and effectively reduce debt load via yen inflation, and at the same time deal a fatal blow to the enduring strength yen bulls. Since there is no free lunch, the only victom would be their domestic savers, who over the past 2+ decades have been piling their life savings into jgb's.

Wed, 11/02/2011 - 05:16 | 1835968 WestVillageIdiot
WestVillageIdiot's picture

I think I tripped over about 12 such Japanese in the Financial District on Sunday.  They were all trying desperately to be the first to have their picture taken with their head near the bull's balls.  I still don't get why all of these Asian guys like having their pictures taken by the bull's balls.  Does anybody have an explanation? 

Wed, 11/02/2011 - 07:53 | 1836102 Vlad Tepid
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Same reason you see a bunch of goofy Americans trying to holdup the Leaning Tower of Pisa through perspective:  human immaturity.

Wed, 11/02/2011 - 04:27 | 1835937 Zer0henge
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BOJ already covered their shorts.  They made money on the trade.  They can do it again anytime.  They always cover immediately after the interventions.  Don't you people know anything?

Wed, 11/02/2011 - 04:31 | 1835940 Snidley Whipsnae
Snidley Whipsnae's picture

Here is a 'year to date relative performance chart' that is very simple to read and comprehend. I find it useful to take a gander at this one occasionally...

It includes commodities futures, various currencies, etc. If you want to look at 'one day relative performance' or any other time period, just change the time scale.

Right now the JPY futures up 3.9% year to date.

In comparison gold is at the top of the chart and is up 21.9%, followed by heating oil, rough rice, feeder cattle, 30 yr bond, pork bellys, etc. At the bottom is cotton at -30.6%. A lot of information can be gleaned from this one chart.


Wed, 11/02/2011 - 04:54 | 1835950 DeltaDawn
DeltaDawn's picture

Thanks Snid!

Wed, 11/02/2011 - 05:20 | 1835972 WestVillageIdiot
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I still remember the dark days when I would still turn on CNBC.  It must have been about 2005 or 2006.  The first time I ever paid attention to the yen versus the dollar it was 124 yen per dollar.  Right now it is about 78.  That is one pretty damn big move.  How come their exports haven't risen in price more?  I find that even harder to understand. 

Let's say we pay $200 for a Nintendo system.  I don't play video games so I don't really know what they cost.  Five years ago that would have been 2,480 yen.  Today it is 1,560 yen.  How can they keep their costs from skyrocketing in dollars?  There is a reason I have the word "idiot" in my name. 

Wed, 11/02/2011 - 07:38 | 1836068 Dingleberry
Dingleberry's picture

They outsuorce too. Japan has massive under-employment. I got a Japanese neighbor, and her kids can't get good jobs in Japan like the old days. And it will only get worse for them once they cannot keep interest at zero.  They are on a bridge to nowhere.

Wed, 11/02/2011 - 08:04 | 1836116 Snidley Whipsnae
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WVI... "Let's say we pay $200 for a Nintendo system. I don't play video games so I don't really know what they cost. Five years ago that would have been 2,480 yen. Today it is 1,560 yen. How can they keep their costs from skyrocketing in dollars?"


Export subsidies are often used by governments to increase exports. Exporters are paid a percentage of the value of their exports. Export subsidies increase the amount of trade and raise employment in the exporting country.

There used to be lots of haggling between governments about export subsidies, sometimes labled 'dumping', because it cost jobs in countries that gov subsidised products were being dumped into.

A government may intervene in the FX or foreign exchange market to lower the value of its currency by selling its currency in the foreign exchange market. Doing so will raise the cost of imports and lower the cost of exports, leading to an improvement in its trade balance However, such a policy is only effective in the short run, as it will most likely lead to inflation in the country, which will in turn raise the cost of exports, and reduce the relative price of imports.

This Wiki link explains the evolution of trade barriers, trade tarriffs, etc. It's not perfect but ok for a start. Note that during the run up to the US Civil War that there was a vast difference of opinion between the northern and southern states about trade tarriffs... also, FDR accused Hoover of 'causing the great depression' due to Hoover's trade policies.



Wed, 11/02/2011 - 05:04 | 1835955 Sequitur
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Phew Eurozone numbers absolutely atrocious. We are opening WAY lower.

Wed, 11/02/2011 - 05:17 | 1835969 Mike2756
Mike2756's picture

Wot numbers? Brents at 110.

Wed, 11/02/2011 - 05:16 | 1835966 jmcadg
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I thought Japanese manufacturers wanted the Yen back at 90.

It will be back below 75 soon. I wonder how much the SNB are having to pump into the system to peg the Swissie.

Admittedly a much smaller market, but no doubt costly.

Wed, 11/02/2011 - 05:20 | 1835973 melanie
melanie's picture

Sony will need EFSF money also? Made a loss of 252 B euro.

Blaming strong yen, floods in Thailand, and decreasing sales in Europe and US

Wed, 11/02/2011 - 05:30 | 1835977 steveo
Wed, 11/02/2011 - 05:49 | 1835984 MsCreant
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Breaking News: Reality has been cancelled until further notice. 

Announcement courtesy of the Central Banking System.

Wed, 11/02/2011 - 06:07 | 1835988 Mike2756
Mike2756's picture

Lotsa news out there, esfs bonds delayed, greek opposition not happy with the military shuffle.

Wed, 11/02/2011 - 06:09 | 1835990 Mike2756
Wed, 11/02/2011 - 06:16 | 1835996 moneymutt
moneymutt's picture

Ummm, do know the history of Icelands currency? It was way up before their banks crahpshed them, then they devalued their currency to get back on their feet.

Wed, 11/02/2011 - 06:19 | 1835997 Mike2756
Mike2756's picture

yeah, it's concern after the fact, lol.

Wed, 11/02/2011 - 06:25 | 1835999 Mike2756
Mike2756's picture

it'll get back to 60, eventually.


Wed, 11/02/2011 - 06:10 | 1835991 Bolweevil
Bolweevil's picture

Woohoo! I've been looking for a reason to reinstate 'pants optional Wednesdays'.

Wed, 11/02/2011 - 07:28 | 1836054 Snidley Whipsnae
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MsCreant... "Breaking News: Reality has been cancelled until further notice."


Or, until central bankers decide that morale among the consuming serfs has improved.

Wed, 11/02/2011 - 06:13 | 1835995 prophet
prophet's picture

"This business will get out of control. It will get out of control and we'll be lucky to live through it."

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