If BoJ eases and MoF intervenes USDJPY could just gap up 2 BF on Monday. Today's moves are unusual but bear in mind the earthquake came late in the day on a Friday. The JPY has been strong for so long there's always going to be a few head fakes at the end of a trend. Apparently, Dennis Gartman was saying USDJPY will go to 75 due to JPY repatriation. Is this the same guy who has been shorting gold these past couple of years?? In the 1995 Kobe earthquake JPY strengthened, but this earthquake is on a much bigger scale, and Japanese government debt is way higher than 15 years ago. This event could be used as an excuse to default on debt, print money to excess, abandon fiscal discipline, all sorts of scenarios. BoJ will print more money, and Japan government will spend more money. More issuance, and who is going to buy JGBs? If it's the BoJ because foreigners won't touch JGBs yielding 1.3% then that's long term negative for the yen. Insurance companies will be sold, construction companies will be bought. I can see Japanese stocks doing ok in yen terms, whilst falling in USD terms as the yen loses value. I would be amazed if USDJPY managed a sustained rally down to 75.
I don't see JPY losing value any time soon. Mrs Watanabe's flows matter more now and in the medium term, IMHO.
Martinghoul Are you long JGBs? Assuming TSE open on Monday what do you think the impact will be, short term and medium term? BoJ apparently shortened Monday's scheduled policy meeting form 2-days to 1-day...
Nah, not long outright JGBs here. Not long JPY either. I def expect a big rally on Monday, but I wouldn't hazard a guess as to what happens next. And yes, I heard about the shortened MPM.
Why no position is you have such strong conviction? Easy to be an armchair trader but you don't make much money that way...
Don't be distracted by broken window analysis of impact on Japan. Wealth is destroyed when assests are destroyed. Assets being a possessive right to a future income stream. We are seeing tremendous damage and destruction of tangible assets in Japan. You have to parse out what is insured and what is not. Clearly, assets represented by income from insurance companies are now worth less. Certainly government assets are not insured...roads, bridges, ports, airports. Farmland and farming operations appear to have been damaged, factories, utilities, transportation, personal vehicles, houses, buildings, shops, inventories all appear to have suffered damange and destruction. New Orleans is much poorer today than it was before the Hurricane. Any one know what happened to New Orleans and Lousiana value of municpal debts, state debts before and after the Hurricane? Long term problem is that Japan government debt is excessive. Debt is supported by assets. To the extent that assets are destroyed the credit value of Japan has changed, for the worse.