JAPAN

[rffrydr]

Core rate up .5%; 3 in a row:

"Mitsubishi UFJ Securities senior strategist Naomi Hasegawa said remarks this morning by Prime Minister Junichi Koizumi fueled conjecture that the central bank will soon end its present policy.

'[Changes in] consumer prices are coming in above zero and we are seeing signs of getting out of deflation,' Koizumi told a parliamentary committee.

His comments were his most positive yet on recent indications that the economy is winning its battle with falling consumer prices. Previously, Koizumi had insisted that it was too soon to say that the economy was coming out of deflation."


Bonds and stocks were short going in. End-of-day showed resiliency, (complaceny?)

Hey Henry, Devil's advocate: with Japanese debt at a Godzilla-sized 160% GDP on the worlds fastest aging population (and most afraid of foreign workers) do they have any choice BUT to reflate their way out? And politicians want a decade for "reforms."

An end to quantiative easing may be announced at the end of Japanese Fiscal Year--but this could take a long, long time to play out. Markets 1st "verdict."
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Today is the Tomorrow you worried about Yesterday!

[Prospero]

Interesting - for me that helps make sense of my puzzlement over the carry trade, i.e. that the yen would seem like a dead cert to unwind in the next few years if the Japanese economy manages to get back on track. And yet the Yen has been reaching new lows against the euro, for example, and doesn't look like turning around any time soon. I was struggling to make sense of that, given that the carry trade's dangers are well known, and the Bank of Japan has made noises about hiking.

But perhaps the weakness in Yen is already anticipating an extended correction for the Japanese economy, which in turn implies less eagerness for the Bank of Japan to raise rates further. Such a correction could easily last six months. I wonder though, that if such a correction does turn out to be temporary, that the the nikkei will make a low before the yen does. Because if it is true that the yen's weakness is dependent on the market's assessment of the BoJ's view of the nikkei, it would make sense for the market to expect the BoJ to be particularly conservative when the Nikkei is suffering a correction.

[dash]

Recent weakness in the Nikkei is definitely one of the items on my worry list. For this year at least, it's been one step ahead of the S&P, beginning its correction in April, and its recovery in June.

One of the items that was on my worry list, and has shifted over to my greed list is the SOX:

http://tinyurl.com/yn93zz

[rffrydr]

That could just be the "Japan can't get out of its own way" effect. And the Thankgiving rally is one of the more dependable.

But wouldn't it be funny if this headline marked a top?

http://biz.yahoo.com/ap/061120/britain_nasdaq_lse.html?.v=21
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Japan down > 350 points at the close tonight. Time for a reevaluation on the long side here, I think. Will keep everyone here posted.

Best,
Henry

[HenryTo]

The election of Shinzo Abe as PM of Japan is all but over:
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Japan Ruling Party Leader Election Broke With Norm, Asahi Says

By Aurel Pasztor

Sept. 21 (Bloomberg) -- Shinzo Abe's election yesterday to be president of Japan's ruling Liberal Democratic Party differed from previous votes because he was unofficially selected months ago, the Asahi newspaper said, citing analysts.

Prime Minister Junichiro Koizumi personally groomed Abe to be his successor even though he has no ministerial experience and has only been in politics for 13 years, the paper said, citing Rei Shiratori, a political science professor at Tokai University. It's very rare for a party leader to be unofficially chosen before the election, the paper said.

Abe has to maintain Koizumi's reforms at the same time as he addresses their negative effects such as economic and social disparities and a widening gap between cities and rural areas, the paper said, citing Shiratori.

Abe won 66 percent of the vote in the LDP election yesterday. He will be voted in as prime minister next week by the LDP which has a parliamentary majority. Abe, who turns 52 today, will become Japan's youngest leader since World War II.

(Asahi English edition, 9-21, p. 1.)

To contact the reporter on this story: Aurel Pasztor in Tokyo at apasztor@bloomberg.net .

[HenryTo]

Interestingly, the "jawboning" of the Yen vs. the Euro failed to spark any kind of rally in the Yen as I am writing this. In fact, Yen just took another 0.40% hit against the Dollar...

[rffrydr]

And what sparked this? CapEX.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

http://www.softwarenorth.net/cot/current/charts/JY.png

Luckily, it's Labor Day, so neither of us were able to initiate their Yen-denominated mortage.

[rffrydr]

No sooner said:

http://biz.yahoo.com/ft/060904/fto090420060731296008.html?.v=1

I hadn't realized the short was a record.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Gimme that Yen-based mortgage! Also has missed any lift recently from new Yuan highs.

But there is also the mid-year repat which starts next week. Alot of August is traditional front-running in thin markets. One thing I've learned over time regarding the currency markets is, come hell or high water, nothing gets in the way of a vacatiion on the Portugese coast!

[HenryTo]

If the following projections do ultimately turn out to be true, then the Yen could head much lower as there is still not much incentive to hedge the dollar against the Yen at this point:

http://www.marketthoughts.com/forum/viewtopic.php?t=2266

[HenryTo]

sjwohio,

Traditionally, August has always been a good month for Yen - as in 12 out of the last 15 years (with the exception of 1995, 1996, 1997, and 2006), the Yen has always gone up during August. The logical explanation is this: The Japanese holds over $600 billion Treasuries. The coupon on these Treasuries is paid during August and when this coupon is repatriated back to Japan, Japanese investors will have to exchange the coupons in dollars back to the Yen - thus causing the Yen to rise in August.

http://www.futuresource.com/charts/charts.jsp?s=JY&o=&a=W&z=800x550&d=medium&b=CANDLE&st=

The fact that the Yen did not rise during this August is very important - although we are not sure on what the implications are just yet. The most likely scenario is that the Yen is in a big bear market, and will thus continue to decline for the foreseeable future. Assuming the Yen topped out in the beginning of 2005 and if we follow the timeline of the last Yen bear market (from 1995 to 1998 - coincidentally, the Yen also declined during August from 1995 to 1997), then the Yen decline could last another 12 to 18 months...

[sjwohio]

Japan carry trade back on?? It's the question being discussed on CNBC.
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SJW

[rffrydr]

Retail Sales DOWN. With expectations UP.

http://www.fxstreet.com/fundamental/analysis-reports/overnight-briefing-far-east-timezone/2006-08-30.html

[rffrydr]

Now the Germans are starting to squeal. --Still, Japan only 5% of BMW sales.

http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-08-28T130703Z_01_L28839029_RTRIDST_0_AUTOS-EUROPE-YEN.XML&rpc=66&type=qcna