In fact, the Bank of Japan has not yet arrived at anything progressive in the QE issue except unclear games played by the Pension Fund with Nikkei papers overvalued to new heights, growth of asset inflation and accumulation of astronomic amounts of cash (around 2 trn or 16.8 bln dollars per month). At the same time, the last factor, in principle, is characteristic of all countries that use quantitative stimulation techniques. "Lazy" money cause such serious discomfort that the government is ready to make corporations spend record-breaking reserves of cash for raising salaries and for capital expenses even by way of "double" taxation of profit. That is exactly the indicator of the fact that huge amounts of money printed by the Bank of Japan do not work, and if the accumulated funds are forced to circulation, the effect will hardly satisfy the exhausted economy.
Last week, the Japanese statistics showed zero annual inflation (without taking into consideration the effect of another increase of sales tax). Steadily falling expenses of Japanese households (-2.9% in February) obviously point out to consumers' uncertainty regarding the future and the fear of a new round of crisis. That is why the Bank of Japan, on the one hand, holds wait-and-see position, trying to assess the effect of falling oil prices on consumer prices, and, at the same time, weak statistics, in itself, puts pressure on the regulator in order to increase the volume of monetary stimulation of economy, otherwise the target level of 2% inflation will turn out to be not quite transparent. Before the planned negotiations between the "Big Six" and Iran, oil quotes made several attempts to go downwards, which turned out to be quite a favorable factor for yen exchange rate. It grew stronger against the G10 competitors not paying attention to yesterday's negative industrial production data for February, although the value fell by 3.4% (last month, there was 3.7% growth). All last week, yen was purchased as safe haven currency. We should expect further growth of long positions in USD/JPY pair, as well as in major Japanese stocks. That is not for the sake of supporting US dollar, it is exceptionally because of current factors that are specific for Japan:
- Chronic undervaluation of BOJ stimulation increase risk by the market;
- Speculative constraining of short positions accumulation process by exporters;
- "Repatriation" of profit made by Japanese companies that will need national currency;
- The beginning of the financial year (April 1) - investors guarantee traditional demand for foreign securities at this time.