It seems the correlation to USDJPY has started to disintegrate and what is more worrisome for the BoJ is the linkage between JGBs and the Nikkei 225. Equities in Japan are about to open to a modest bounce around 1.5% but JGB prices are down around 0.50 (half the limit-down price moves). So, the problem for the BoJ is - do you let JGBs flop to maintain your equity market's appearance of normality? Or are Japanese stocks about to be as implicitly repressed as the bond market? It would appear TPTB are doing their best to ramp the JPY to keep this bounce alive (USDJPY opening just shy of 102.50).
- *AMARI SAYS 'ABENOMICS' IS PROGRESSING STEADILY (this is progress?)
- *AMARI SAYS BOJ IS COMMUNICATING CLOSELY WITH MARKETS (we suspect the market is communicating back even more)
As The Telegraph's Jeremy Warner noted:
What the subsequent violent gyrations in markets indicate is that any hint of applying the brakes risks generating a fresh financial crisis, which in turn would render the economic recovery still born. Both financial markets and the real economy have become addicted to "quantitative easing", such that they can't do without it.
...
Central bankers dream of getting back to "normal"– normal interest rates, a normal balance sheet, and so on. But that point isn't going to come any time soon. They are stuck on a money printing treadmill, and there appears no way off.
Japanes stocks made it to the 38.2% retrace just like the S&P 500 did and faded...
Careful what you wish for on the rebound... JGBs heading for limit-down (inverted below to show correlation)
and longer-term - JGBs have some room to the downside as the BoJ loses control...
JPY being dumped hard to keep the dream alive...
Charts: Bloomberg