Late last night, everything was going great, or horribly wrong depending on whether one still has some frontal lobe neurons left after years of indoctrination at Keynes U, and the USDJPY was soaring, levitating slowly at first then surging and touching 115.50, just 450 pips from the USDJPY 120 "pure insanity" level, when everything went wrong.
This is the blow-by-blow thanks to Bloomberg:
- At 12:50pm Tokyo time, Nikkei 225 Index was sitting pretty, up 0.5% for the day. Then came the tumble.
- Over the next 22 minutes, Nikkei Index lost 1.8% to touch intraday low of 16,725.45
- USD/JPY followed suit, but with a lag, based on data compiled by Bloomberg; currency slid from 115.38 to 114.46 during that period, marking 0.8% drop
- Japanese banks sold down Nikkei to take some money off the table, given its 8% advance since Oct. 31 when BOJ announced its latest easing, which in turn caused USD/JPY to retreat, according to a Tokyo-based FX sales trader
- Nikkei 225 closed down 0.9%, reversing earlier gain of as much as 0.6%
And the chart which quite visibly shows that Japan is now a cardiac-arrest patient in terminal V-Fib.
At least the country which one year ago brought daily flash crashes - and halts - of its entire bond market, is keeping it interesting, and now algos have to wonder just when the next fake market flash crash will tumble, and wipe everyone out, when the upward left of the V-shaped recovery refuses to appear.
But perhaps the one thing that guarantees Japan's economic death was this, from Bloomberg: Economist Paul Krugman met Japanese Prime Minister Shinzo Abe this morning and said he was worried a further increase in sales tax planned for next Oct. could cause Abenomics to fail, Abe aide Etsuro Honda said. Krugman did not specify how long the delay should be, saying he was concerned increasing the tax as scheduled could mean Abenomics fails. Abe did not give his own view on the tax.
Sorry Paul, Abenomics already failed: here is a chart of Japan's nominal and real wages - for ordinary Japanese consumers it is just a matter of when not if they panic.Per Goldman: "Real wages (nominal wages less the CPI inflation) registered a large decline of 2.9% yoy, after falling 3.1% in August. Summer consumer spending was sluggish in spite of the largest rise in summer bonuses since 1991, even considering the impact of the consumption tax hike and bad weather. Despite high one-time bonus payments, the continuous decline in real wages, especially the much lower pace of increase in basic wages (which is considered permanent income) relative to inflation rate, is restricting consumer behavior."
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The only good news: Japan has now moved into the Krugmanesque twilight zone, where the only remedy to failure will be doing more of what caused the failure in the first place, thus mercifully accelerating Japan's implosion into the Keynesian abyss.
