Japanese Deflation... A Liquidity Wild Card by Greg Weldon

[Sapiens]

http://www.marketoracle.co.uk/Article1749.html

Lots of charts in the article:

Deflation is taking hold again in Japan ...

... while wealth disinflation is becoming more acute in the US stock market.

It is NOT coincidence that BOTH ... Japanese AND US bank shares, brokerage shares, and consumer-retail sector funds are LEADING the global markets LOWER.

This is a MAJOR macro-message being sent to investors around the world.

A move in USD-JPY below 118 might just cause the next shoe to drop.

Expect it.

[friendly_jacek]

Re: Japanese Deflation... A Liquidity Wild Card by Greg Weldon

http://www.marketoracle.co.uk/Article1749.html

Lots of charts in the article:

It's true that JPY is the key to world markets as JPY correlates inversely with most indices. However, i don't see JPY rising (firing the starter for market declines) before the USD-JPY spring reloads to the 120 range as it has done in the last couple of years.

[Sapiens]

Yen Rises to Highest Since 2006 as Investors Exit Carry Trades

http://www.bloomberg.com/apps/news?p...d=a78Kgz3I.Ots

``The market is in panic mode,'' said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon in New York, the world's largest custodian bank with over $20 trillion in assets. ``There is uncertainty about how many banks and funds are exposed to the subprime sector. It is a full-blown unwinding of the carry trade. And this is just the beginning. You are going to see things turn worse before they get better.''

The Japanese currency advanced 1.7 percent to 114.63 per dollar at 9:10 a.m. in New York, after reaching 113.60, the strongest since July 2006. It climbed as high as 151.98 per euro, the strongest since March, before trading at 153.85.

I feel the pain for my fellow men, but what's a business man to do? Nothing but profit from their greed.

[Mega]

Re: Japanese Deflation... A Liquidity Wild Card by Greg Weldon

Could somebody give me a "Layman" version of this?
Mike

[c1ue]

Re: Japanese Deflation... A Liquidity Wild Card by Greg Weldon

Again completely opaque comments from Sapiens, but here's my take:

Yen appreciation vs. dollar = major correction in Japanese stocks = vicious circle for yen carry trade.

The one thing besides BOJ raising rates that will kill the carry trade dead is if the Japanese stock market start tanking because their years of easy yen-based comparisons break down due to the yen going up vs. dollar.

Just as US multinationals are showing increasing profits now due to the weaker dollar in Europe and rest of ex-Asia world, the Japanese companies - mostly exporters - have been looking good due to the yen weakening vs. the dollar. This is why the Nikkei has been on a tear more or less since the beginning of 2005.

See:

http://finance.yahoo.com/q/bc?s=USDJ...&q=l&c=%5En225

[Mega]

Re: Japanese Deflation... A Liquidity Wild Card by Greg Weldon

Thank You!
Mega