Mark Chandler on Yen Anniversary

April 4th, 2014 7:11 am | by John Jansen |

Via Mark Chandler of Brown Brothers:

  • Today is also the first anniversary of the Bank of Japan’s “Qualitative and Quantitative Easing” policy.  The effectiveness of it remains an open question, although the yen has fallen and the stock market has risen.  Most observers, including those Japanese businesses participating in the Tankan survey, do not expect the BOJ to achieve its 2% inflation target.  In addition, it is not spurring the increase in domestic investment that had been expected.  Nor are base wages rising.  With the BOJ buying so many JGBS, there is beginning to be more concern about the shortage of government bonds as collateral, which are similar to the distortions seen in the US.  
  • Over the past seven sessions, the dollar has risen from near JPY101.70 (the middle of the February and March trading range) to test the JPY104 area yesterday and today.  This is the best level since late January.  Behind the yen’s weakness is likely its use as a funding currency on ideas that 1) geopolitical risks have subsided, 2) there is no real risk of tighter monetary policies over the next 6-9 months, and 3) US economy is likely to strengthen and US bond yields have risen in anticipation.
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