Bank of Japan

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How to Play the Japanese Stock Market Euphoria

By , Associate Editor, Money Morning • @JimBach22 -

Japanese stock market

U.S. market indexes plunged yesterday (Wednesday) and took the Japanese stock market with them.

The Nikkei 225, a Japanese stock market index tracking 225 Japanese blue-chips, fell 1.4% today. This was the day after a broad sell-off in the U.S. stock market. This was a blip in what will be a larger rally.

Japan is presenting an opportunity, but this recent sell-off shows that investors need to be discriminant in buying Japanese stock...

Big Central Bank Meetings Present an Opportunity to Profit

By , Associate Editor, Money Morning • @JimBach22 -

central bank meetings

Amidst a wave of central bank meetings this week, the European Central bank and the Bank of Japan matter the most.

The BOJ strategy will change little save for the possible extension of a mostly ineffective lending program. The ECB will probably announce a bond-buying program to hasten depreciation of the euro.

Savvy investors can profit from both moves.

Here's what investors need to know about - and how to profit from - this week's central bank meetings...

Japanese Recession: How to Play the Dismal Growth Reports

By , Associate Editor, Money Morning • @JimBach22 -

Japanese recession

The news of the Japanese recession has taken economists by surprise, but the problems with the Japanese economy have been so entrenched that no negative news should come as a shock.

You see, Japan has been battling with deflation for most of the last two decades, and that's only helped to reinforce this current bout with recession.

Here's how to play the Japanese recession for gains.

Bank of Japan Called "Single Biggest Danger to Global Markets Today"

By , Money Morning -

The Bank of Japan is sticking to its policy of fiscal stimulus to try to stoke inflation, and that's rattled markets worldwide.

There are short-term signs of economic recovery such as an increase in consumer spending and in manufacturing.

But longer-term, Money Morning Chief Investment Strategist Keith Fitz-Gerald told CCTV, "there has never been an instance in history where stimulus has worked. So the question really is when, not if, this will break down."

Check out the accompanying video to learn why Keith considers the Bank of Japan "the single biggest danger to global markets today."

Early Exit from Bank of Japan Governor is Good for Abe

By , Money Morning -

Bank of Japan Governor Masaaki Shirakawa told Prime Minister Shinzo Abe yesterday (Tuesdsay) that he will step down a few weeks early, on March 19, in order to align his term, which expires on April 8, with those of the two BoJ deputy governors.

"I told the prime minister that I will resign on March 19 so that a structure with a new governor and two deputy governors can start simultaneously," Shirakawa said at a press conference called after a meeting of the Council on Economic and Fiscal Poicy.

This will enable Abe to replace the entire central bank leadership all at once with people who are more sympathetic to his policy of unlimited easing.

Although some press reports have highlighted the apparent unenthusiastic support Shirakawa is giving to Abe's policies, Shirakawa's resignation is really just putting the Bank of Japan leadership transition process back to normal.

The Bank of Japan governor must be approved by both houses of the Diet. Back in 2008, former deputy governor Toshiro Mutoh was nominated for the top spot by the ruling Liberal Democratic Party (LDP) which held a majority in the Lower House but not in the Upper House, where the opposition Democratic Party of Japan (DPJ) held sway.

The DPJ rejected Mutoh's nomination and it took three weeks of political infighting before Shirakawa was approved as a compromise candidate and took office on April 9.

The situation is exactly the same today. Abe's LDP has a super majority in the Lower House but must get some opposition support to get their nominee approved by the Upper House.

By resigning as governor effective March 19, Shirakawa is undoing the delay caused by political wrangling five years ago.

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Here's the Surprising Winner of the Currency Wars

By , Money Morning -

With the Bank of Japan now buying government bonds and targeting an inflation rate of 2%, a global "race to the bottom" is on again.
Japan's latest move has sparked new fears of a currency war. They're competing with the Fed's commitment to "quantitative easing" and the ECB's promise to buy dodgy Mediterranean economies' bonds.
However, the mathematical reality is that the world's major currencies can't all be catastrophically weak against each other. It's impossible.
Like any other war, this one won't end well, either.
But the winner may surprise you...

Bank of Japan Policy is Doomed to Failure

By , Money Morning -

The Bank of Japan (BOJ), Japan's central bank, bowed to government pressure this week by adopting a 2% inflation target and accepting responsibility for achieving that goal "as early as possible."

The BOJ announced today (Tuesday) that it will begin a program of "unlimited easing" beginning in January 2014 following the end of the central bank's current asset-purchasing program in December.

In a statement announcing the results of Tuesday's Monetary Policy Committee meeting, the Bank of Japan said it anticipates purchasing 10 trillion yen in Treasury notes and 3 trillion yen in Japanese government bonds (JGBs) each month beginning in January 2014.

The statement also indicated the central bank's balance sheet will expand by about 10 trillion yen by the end of 2014 as a result of the purchases. No further expansion of the BOJ balance sheet is anticipated thereafter.

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Money Morning Mailbag: Japan's Rising Yen Struggle Signals Need for Industrial Shift

By , Associate Editor, Money Morning -

The yen strengthened as much as 82.75 per dollar Wednesday, fueled by speculation that the U.S. Federal Reserve would buy more government bonds after a drop in U.S. payrolls.

The yen's rise came after the Bank of Japan tried yet again this week to devalue its currency. On Tuesday the Bank of Japan lowered the benchmark interest rate to "virtually zero," and announced a $60 billion (5 trillion yen) plan to buy government bonds - similar to the 'quantitative easing' policy employed by the U.S. Federal Reserve.

"With today's decision, the Bank of Japan paved the path for the next step," Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo told Bloomberg News on Tuesday. "What will be critical will be how foreign-exchange rates move as a result," along with the impact of any additional easing by the Federal Reserve, she said.

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As QE2 Looms, Is the Fed Focusing on the Wrong Things?

By , Money Morning -

U.S. Federal Reserve Chairman Ben S. Bernanke is looking forward to 1932.

That's not a misprint. Actually, Bernanke is looking forward to a point when the challenges facing today's U.S. economy mirror the problems of that particular Great Depression-era year. And he wants that to happen for a very simple reason.

He knows how to solve those problems.

Unfortunately, "1932" isn't likely to arrive. And the preparations the Fed is making in the meantime are likely to deepen the United States' economic woes.

Let me show you what I mean...

To see where the central bank has gone wrong, please read on...

QE2: How New Quantitative Easing Will Launch Emerging-Market Stocks

By , Money Morning -

 In Wall Street circles, it's known as "QE2" - for "Quantitative Easing - Round 2."

The U.S. Federal Reserve and the Bank of England (BOE) are moving rapidly towards it, and the Bank of Japan (BOJ) has pledged to enact it.

That Bank of Japan pledge ignited a $23.50 spike in the price of gold on Tuesday. But that's nothing compared to what would happen after a Fed move. An additional easing by the U.S. central bank would cause gold and commodity prices to spike - and emerging-market stock markets to soar.

We should be prepared for this eventuality.

To see how you can profit from "QE2," please read on...