What’s The BOJ To Do?
What can the Bank of Japan do? Interest rates are near
zero and it has bought more bonds (in an attempt to provide liquidity to the
economy) than investors want or banks can use to re-lend. The economy is in an
11-year slump and six of those have been with a near-zero interest rate. Economic
activity is stagnant as banks hold vast sums of bad debt and the government’s
attempts to buy Japan back to economic health through pork-barrel spending
projects have failed (Japan now has approximately 10-times the public debt of
its industrialized peers).Â
The central bank’s hands are tied and it is now up to the
politicians to devise a scheme to write off the bad debt and restructure myriad
inefficient business relationships that hamstring the nation. And this is
essentially what Bank of Japan Governor Masaru Hayami said to parliament
yesterday, basically leaving it up to the body politic to take some kind of
decisive action toward reform before it moves.
But in highlighting the government’s slow pace, Hayami
said there has been “little progress so far.”
This negative reading of the economic situation — and
the end of new prime minister Koizumi’s honeymoon — are sending the Sep yen
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lower in an outside day out of a two-day pullback, breaking a well-defined trend
line. Now at the .8200 level, the yen is likely to find support at this
one-month level, given its extended range already today, but the breakdown is
ominious.Â
Although their expansion bars from yesterday make the
travel distance too great to trigger their 1-2-3-4 Pullback From
Lows setups,
euro FX futures
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bleeding back into yesterday’s range. Downside in the aforementioned is spurring
mild support in
September dollar index futures
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setup.Â
Also in a short Pullback From Highs setup and from the Momentum-5
List, August lean hogs
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.825 at 66.900.
From the Implosion-5 List,
copper
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trading at a contract low, highlighting tepid demand for the industrial metal
and severe weakness in the the US industrial economy. Copper just triggered out
of an Off The Blocks
entry.