Comments For Chart "How high can US$ fly, versus Yen, before BoJ Intervenes?"13.05.2013
The Wise Sages of Ancient days used to say, “The fate of a Liar, is that nobody believes him, - even when he’s speaking the truth!” Such is the case for Japan’s propaganda artists, including the Prime Minister, the Finance minister, and central bank chief, who are all trying to cover-up their boldest scheme yet, to crush the value of the Japanese yen, against the currencies of its major trading partners. On May 11th, the finance chiefs of the Group of Seven (G-7) gave Tokyo the green light to continue with its radical QE scheme, which has already led to a -24% devaluation of the yen against the US-dollar, and a -33% devaluation against the Euro, since market savvy traders first got wind of the plot in late November. -------------------------
In an age when ruling coalitions of every political stripe distort the truth to promote their self interests, it’s hardly surprising that Japan’s ruling LDP party is steadfastly denying that it’s engaging in a “beggar thy neighbor” devaluation of its currency. By the same token, Tokyo’s fraudulent claim that its economy is still plagued by a negative rate of inflation (deflation), is so wildly at odds with reality that it’s routinely regarded with cynicism and disbelief.
-------------------------- How high can US$ fly, versus Yen, before BoJ Intervenes? If the yen begins to plummet into a free-fall, Japan’s competitors in China, Germany, Korea and the US might cry foul and demand that Tokyo either scale back its Big-bang QE operations or stop them completely. Otherwise, other central banks might push back against Tokyo in a full scale currency war, the likes of which, the world has never seen before. However, Tokyo is confident it can prevent a free-fall of the yen, and that it can carefully orchestrate a gradual devaluation, with verbal Jawboning exercises and utilizing its enormous war chest of foreign currency reserves, now totaling $1.26-trillion, and mostly consisting of US-dollars. ------------------------------
Although Japan is supposed to refrain from using its FX reserves for purposes of direct intervention in the currency markets, according to the Feb 12th G-20 communiqué, the renegade BoJ is expected to begin clandestine sales of US-dollars at higher levels, in order to keep a two-way market intact, and prevent a currency free-fall. Where would Tokyo try to cap the US-dollar’s advance? On January 18th, Koichi Hamada, the chief architect of “Abenomics,” gave a subtle hint to reporters at the Foreign Correspondents’ Club of Japan in Tokyo, saying the US-dollar can rise to ¥110 before excessive inflation risks kick in. “If the dollar goes above ¥110, there may be reason for worry, but at ¥100 or ¥95, it’s OK.”
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