Wednesday, December 26, 2012

The Yen Broke Down Recently Because Japan's Abe Wants the BoJ to Print Money Like Crazy to Spark Inflation ($USDJPY)

On December 16, Shinzo Abe became Japan's next Prime Minister. He essentially wants the Bank of Japan to print an unlimited amount of money to stimulate inflation and exports via a lower yen, which explains the recent move. Traders or currency funds were already pricing in the outcome of the election on November 14 and 15, when USD/JPY broke through a 4-year downtrend line and 2-year ceiling resistance level (see second chart). Watch Japanese government bonds (JGBs) to see if anything really happens. 5-year JGBs currently yield 0.187%. If Japan can't spark inflation, it will end up just fighting against the Federal Reserve and other central banks to lower its currency.

USD/JPY Daily Chart (Source: FreeStockCharts.com)


USD/JPY Weekly Chart (source: FreeStockCharts.com)

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