CommoditiesTrader

Will the BoJ Increase QE In Two Weeks? Doesn't Matter.

FX:USDJPY   U.S. Dollar/Japanese Yen
With markets on edge and Japanese inflation data this week, those short the yen are hoping the Bank of Japan Governor, Haruhiko "Kamikaze" Kuroda, will further increase the balance sheet through more quantitative easing. Because when everything else fails, he'll try to go all in.

Or will he? Essentially, his brilliant idea to implement negative rates, or NIRP, was seen as a policy error even quicker than the Fed's first rate hike in seven years. Economists, bulls and bears alike, said that NIRP would do absolutely nothing for the Japanese economy. But, Kuroda didn't go from no NIRP to NIRP in a week's time to strengthen the economy. It was to deter yen strength and perk up hemorrhaging risk assets, which failed miserably.

If inflation data comes in soft, we are likely to hear the threat of quantitative easing but it is unlikely that the BoJ can match the most bang for the yen traders saw when this whole quasi-policy began. Analysts expect that Kuroda may increase the level of exchange-traded funds, a market where the BoJ already owns 52 percent, since there is virtually no more debt to purchase do to existing quantitative easing measures.

It's possible, but does not matter in the end. The global marco downturn is in the drivers seat, and a single central bank cannot change that, especially when $12.3 trillion in QE and 600-plus rate cuts since the financial crisis have barely kept the global economy spuddering along.

With global trade continuing to collapse, the weak yen facade is crumbling. January's exports fell a whopping 12.9 percent and imports dropping 18 percent. GDP contracted 1.5 percent in 2015 on an annual basis, and Japan has seen three recessions since PM Shinzo Abe             took over in 2012.

External debt and the BoJ balance sheet hit all-time highs (unlike the Nikkei).

Those nickel-and-diming headlines - be careful. As we've seen in February alone, the actions of the BoJ erased nearly eight months of gains.

Do macro, or macro will do you HARD.

I reiterate a target of 110 by Q3 and 105 by early-2017. That will likely be for starters if the US falls into recession, as forecasted. Potential pullbacks to 114.55 and 116 on central bank induced risk taking probable.

The problem with this crusade for inflation , and this goes for all central banks, by reckless measures is fiscal calamity will arise when inflation takes hold. Rates will have to increase, and debt will not be payable.

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