Joining its partner in economic destruction and currency devaluation (Argentina) [5], Japanese stocks have just crossed over to the dark-side. After a glorious "well, the market is up, so everything must be great" rally of 85% in six months, the Nikkei 225 is now down over 20% from its highs - signifying a 'bear market'. This is the largest 10-day plunge in 27 months as volume has exploded on the downside. We wonder how the herds representing these five charts are feeling now [6]? At the same time, JPY has broken back below 99 against the USD (and AUDJPY is at 5 month lows) as the entire JPY-funded rampage comes undone - seems like the message from the FX option market was spot on again [7]. This is the lowest level in two months since Kuroda first spoke at the BoJ. Get that porta-potty ready [8], Abe... What next? Blame speculators? Short-sale ban? Shorting ban?
Initially sparked by a 5.0 earthquake - which was quickly saved - once the Japan's 30Y bond sale had passed (and ramped JGBs), equities started to fade rapidly... then the desperate defense of USDJPY 99 began (which sent JGBs lower)...
[9]
and then "it" happened... (just look at the two 250-300 point ramps that were tried to spark some momentum before it finally failed)...
[10]
From its highs at 16,020 on 5/22, the Nikkei 225 has now dropped 20% (12,815) - officially entering bear market territory. The low before it bounced was 12,810.
This is the first time near the 100DMA (green line) since the rally began...
[11]
leaving the Nikkei return (hedged for JPY) only 7.2% YTD... (and at three-month lows)...
[12]
It seems the BoJ has indeed lost control of the triumvirate of JPY, JGBs, and Stocks - as the latter now place each other in jeopardy at a higher and higher beta to JPY's swings.
Charts: Bloomberg