Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Japan Quantitative Easing – A Curious Conundrum

Interest-Rates / Quantitative Easing Oct 21, 2010 - 12:46 PM GMT

By: David_Urban

Interest-Rates

As I mentioned in the Week in Review the move last week by the Bank of Japan to cut interest rates and enact a new quantitative easing program along with the lack of moves by Indonesia and Australia coupled with the immediate rally in equity markets looks increasingly like a coordinated global intervention to push up equity prices to help Japan. 


Looking at other Asian markets there is a flood of hot money roaring through these markets like a tsunami.  For someone who was and still is bullish on the equity markets I have to take pause here.  The Thai Bhat has rallied down below a crucial support level at 30 and there are calls from the business community to help stem the appreciation in the Bhat as this is hurting FDI and exporters just as the political climate is showing signs of stabilization. 

This is more than a short-term issue and this flood of money will cause unintended consequences in 2011 as the Asian growth machine continues to lead the world out of the recession. 

Strong growth across Asia, ex-Japan, is fueling inflationary worries as increased purchasing power is driving demand in local markets.  The increased demand for products is beginning to fuel the flames of inflation.

But there is a thorn in the side of the central banks as they attempt to stomp out inflation before it takes root and that is Japan.

Continued slow economic growth in Japan is hampering efforts by other Asian central banks to stem the flow of hot money into their capital markets. 

A rise in interest rates by Asian central banks would risk creating an enormous carry trade between Japan and the other Asian countries possibly adding further to flows of hot money into Asian equity markets.

But what has me most concerned was a simple picture a few weeks ago of a young Japanese woman putting up a poster extolling the virtues of investing in JGB's.  My concern here is twofold.  First, as Japan enters into an environment where their aging population must increasingly redeem their JGB's and foreign capital markets are unlikely to chase yield in Japan the only pool left to tap is the younger generation.  By doing so this pulls money that would go into consumption or the Japanese equity markets. 

If the younger generation decides to follow in the path of their parents and buy JGB's it is unlikely that local participation in the equity markets will rise and create a new bull market in Japanese equities.  Just as well, consumption figures will remain low and if consumption does not increase then it is likely that deflation will continue well into the future. 

By David Urban

http://dcurb.wordpress.com/

Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author.  We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER. 

Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile.  This is not intended to be investment advice or a solicitation to purchase any of the securities listed here.  I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

David Urban Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in