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 [5], 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 [6]. 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 [6], 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...
[7]
this implicit inflation has historically had a significant impact on Japan's economy...
[8]
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 [9], 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