Helicopter money, that’s the big talk in the past week. The term helicopter money refers to a case where the government hands out money to citizens and funds it through printed money. The last time helicopter money was relevant was back in 2009. That’s when Ben Bernanke, then Federal Reserve Chairman, literally opened up the printing press and poured massive amounts of liquidity into the bond market, in tandem with a massive fiscal stimulus plan from the US government. Now, investors are speculating that the BoJ is ready to unleash a similar move, in coordination with the Abe government. And with the BoJ monetary policy meeting scheduled for this Friday, investors have high hopes. Are these hopes in place?
Kuroda Vs. Abe
In the past several months, BoJ watchers have been routinely underwhelmed by the BoJ’s statements. The BoJ slashed deposit rates to -0.5% and increased its QE program to a whopping ¥80 Trillion. But since those two announcements deflation has returned, yields on Japanese Government Bonds plunged to record lows and Japan’s GDP growth marked a modest 0.1% annually. And still, no monetary bazookas have been announced. Continue reading "BoJ Ready for Helicopter Money?" →
Over the past few weeks, the Yen has been softer against its European peers, e.g. the Euro and the Pound Sterling, as risk appetite gradually made a comeback. Yet against its American peer, the US Dollar, trade has been rather subdued. The Dollar and Yen, the world's most sought after safe haven currencies, move generally in tandem. Because investors have had some difficulty choosing the front runner between the two, it has resulted in a sideways moving USD/JPY pair. The combination of a soft patch in the US economy and uncertainty over Japan's economic future has also made it difficult for some market movers to assess the next trajectory for the Yen. Yet, in either case, that is still a mere projection with no tangible evidence (yet) to tilt sentiment either way, in favour of the Yen or in favour of the Dollar. However, that might soon change; moreover, the reaction in the USD/JPY could be abrupt, swift and for some, devastating. Continue reading "JPY Set For An Abrupt Move" →
Why the biggest monetary stimulus effort in the world did NOT stop deflation in its tracks
By Elliott Wave International
When Shinzo Abe became the Prime Minister of Japan in December 2012, he was regarded with the kind of reverence that politicians dream about. He was featured in a hit pop song ("Abeno Mix"), hailed as a "samurai warrior," and featured on the May 2013 The Economist cover as none other than Superman.
But in the two short years since, Abe as Superman has been struck down by the superpower-zapping force of economic kryptonite. On November 17, government reports confirmed that Japan's brief respite from a 20-year long entrenched deflation was over as the nation's 2nd & 3rd quarter GDP shrank 7.2% and 1.6% respectively.
In the words of a November 20, 2014 New York Times article: Continue reading "Abenomics: From Faith to Failure" →