Wednesday September 14, 2005 - 11:04:32 GMT
Share This Story
Black Swan Capital - www.blackswantrading.com
ZIRP end could help yen
•Bank of Japan Deputy Governor Kazumasa Iwata said on Wednesday the central bank is now "very close" to ending its super-loose monetary policy, fuelling speculation that a policy shift could come sooner than markets have anticipated. (Reuters)
•Key reports due today (WSJ):
8:30a.m. August Retail Sales. Consensus: -1.4%. Previous: +2.2%.
8:30a.m. August Retail Sales, Ex-Autos. Consensus: +0.5%. Previous: +0.3%.
8:30a.m. August Capacity Utilization. Consensus: 79.8%. Previous: 79.7%.
“Egoless people have nothing to protect. They just do whatever the market tells them to do.”
Edward Toppel, Zen in the Markets
BOJ to end of ZIRP! Wow! Is it yen buying time?
ZIRP – Zero Interest Rate Policy; the seemingly perpetual policy backdrop for the Bank of Japan (BOJ) intended to flood the market with liquidity in order to stave off the ravages of deflation which emerged and gripped the Japanese economy following bursting of the financial bubble, the Nikkei in 1989, then the real estate market approximately 18-months later.
Today it was reported (Reuters story in key news above), Mr. Kazumasa Iwata, Deputy Governor of the BOJ, recently said ZIRP may soon be history. Why is this potentially a big deal for the yen?
1)Supply – If the BOJ stops creating so many yen, the supply falls. When the supply of something falls, other things held constant (ceteris paribus for the purist among us), its price tends to rise. But if ZIRP does change, other things will not stay constant…
2)Demand – If the BOJ actually raises interest rates, the demand for yen could rise significantly (but it need not rise significantly, only marginally would do the trick if supply declines enough) as Japanese investors and other hot money players might begin to allocate a greater share of their deposits to yen. Already money is flowing into Japan’s stock market.
3)A happening place – The dynamic of rising Japanese yields, a seemingly improving economy (the economy expanded a real 0.8 percent in the April-June period ), and the potential for real structural reform in the wake of Prime Minister Koizumi’s impressive election victory make Japan a happening place.
Could this be the beginning of a self-feeding price trend? Stranger things have happened.
The stock market is already reflecting the improving sentiment:
Chart: Nikkei Futures Weekly
…and the yen:
Chart: $/yen daily
Jack Crooks - Black Swan Capital
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."