News Links: Japan’s Hidden Jobless

2011/11/16 00:43 – Japan’s Hidden Jobless Hits 4.69mn, Worse Than After Lehman Shock The number of Japanese that want to work but are not actively seeking employment has surpassed levels from after the global financial crisis erupted, according to government data released on Tuesday. Some people have given up searching for work because they believe

Why the Yen is Strong

The yen and the Swiss franc were seen as safe haven currencies during the tumultuous crisis in Europe. The Swiss National Bank has effectively and apparently cheaply took the franc out of the game. This may have increased some speculative pressure toward the yen.

Yet dismissing the yen’s strength as speculative in nature makes analysis superfluous. It misses the underlying imbalance that the yen’s strength reflects

Key data to focus on in the week ahead

Economic data has been of tertiary concern to the market recently, overwhelmed by the drama in Europe. Given that the drama may die down, with new governments in Greece and Italy, the economic data may become somewhat more important

New Governments, Same Problems

Markets failed to get a lasting boost from change in EZ governments; dollar broadly higher into open. Italy auction met with decent response, but higher yields nonetheless ; change in governments no panacea in EZ. Japan’s preliminary Q3 marks the end of the recession; Hungarian forint weakest currency on the day

Thai Floods and Yen Appreciation

Given the poor track record of intervention, unilateral or multilateral, sterilized or unsterilized, there may be no compelling need to understand why the $100 bln intervention is not sticking. All sorts of possible explanations seem partly at play. Intervention has not been repeated. The failure to push the greenback above JPY80 lent bullish yen safe haven views intact. Spot intervention is less effective than repeated operations in the swaps and options market too, as the SNB is thought to have done.

In any event, another force may be at work and that is the floods in Thailand. They have hit the Japanese auto sector hard as Thailand is an important production base. Other industries have also been hit as reports by Hitachi and Canon indicate

The BoJ’s Intervention Treat

Risk aversion is taking hold again with global stocks broadly lower; dollar firmer against majors. Price action dominated in part by BoJ intervention; on the data front Chicago PMI and Canadian GDP. Norway’s central bank indicated it will add to foreign currency to oil fund; Korean IP focus in EMs

Quantitative Easing!!!

The BoJ announced today that it will expand its asset purchase programme by JPY5trn (USD66bn), with all the purchases being directed at JGB’s. Add that to the GBP75bn (USD120bn) by the BoE, CHF50bn (USD57bn) by the SNB and the EUR341bn (USD477bn) expansion of the ECB balance sheet since the end of June, and it collectively adds up to USD720bn. Clearly this explains the market rally from the low

Gold Breaks Out — Print Away!

Gold is up big today and trading like the monetary printing presses are ready to kick into overdrive. We believe the recent Fed speak about QE3, possible BofJ intervention to weaken the yen, and growing expectations that tomorrow’s announcement by by the EU may fall short and force the ECB to monetize bond purchases are contributing to the move. In addition, given the recent PMI data out of Europe, the ECB may be forced to ease sooner rather than later and even hearing hints and rumors floating around the ether of China easing

Fed Outgunned, EMU Outflanked

The auxiliary objective of QE by the Fed is to weaken the USD. Herein lies the rub. Quite simply, with the recent announcement by the BOE of another round of QE worth £75 billion, with the ECB now willingly or unwillingly being forced into increased support of peripheral debt markets and with the BOJ also pledging more stimulus, the Fed is starting to look like the conservative central bank in the G4. Even if Merkel and Sarkozy, and rightly so, appear most concerned with putting pressure on Italy, the most significant issue remains Greece which is now in default a fact that was un-sanctimoniously confirmed by the leaked bailout document which has the Troika admitting that the medicine they were mandated to administer would only make the patient worse and not better

Japan: Yen upside risk on deflation threat

More broadly, the recovery from the March tragedy appears to be running out of steam. Retail sales which surged in the April-June period fell in both July and August and deflation appears to be threatening again. The year-over-year pace of national CPI is expected to slip back to 0.1% in August, when reported in early Tokyo on Friday. The Sept readings for Tokyo are expected to be -0.2% year-over-year

IMPORTANT: Long-term interest rates are a series of future short-term rates

On how the expectations theory of interest rates explains why debt-induced depressions are fundamentally deflationary in nature

Holders of Sovereign Debt

Here’s a great chart just released by the International Monetary Fund for Greece, Portugal, and Ireland as well as Japan, the US and the UK. Note that almost half of the US federal government debt is held by the Federal Reserve and the government itself, such as the Social Security trust fund. Add to that the 22 percent foreign official holdings (mainly central banks) and almost 70 percent of the debt of the U.S. government is held by non-market/non-profit oriented investors