The Bank of Japan on Friday made it clear that while they stand ready to support their banks in the case of a Greek exit from the Euro following this weekend’s elections, they also made it clear that they will not intervene until and unless the Yen (AMEX:FXY) sets a new high against the U.S. Dollar (AMEX:UUP). So, if the USDJPY cross falls below 75.31 folks the BoJ will expand its asset purchasing program. Buying the long end of the maturity curve.
In response to this statement what does the USDJPY cross do? Drop like a rock. The BoJ’s statement is a green light to traders to buy Yen versus the dollar in the short term, thereby nearly guaranteeing a move to the BoJ’s Maginot line. It doesn’t hurt that the indicators coming out of Japan are far healthier than those coming out of the U.S. In my analysis, the Nikkei 225 (AMEX:NKY) is bottoming here and getting ready to go on a generational bull run on the strength of the next wave of Southeast Asian expansion with the Yen acting as the new reserve currency of the East.
Europe and the U.S. have entered the state Japan was in 20 years ago. Japan’s balance sheet at this point is far more transparent and sustainable now that they and China have moved closer together in economic terms. The open trading between the Yuan and the Yen was the signal for a fundamental change the structure of the world’s capital markets. Be prepared to rethink everything you think you know about them.
Previous Post » Caterpillar Increase its Dividend by 13 Percent
