Things are getting very, very, very interesting in Japan. Dow Jones is reporting this evening that a close adviser to Japanese Prime Minister Abe has said that the Bank of Japan may call an emergency meeting if market conditions continue to deteriorate and financial turbulence continues.
Two things he mentioned in particular. ONE [ and the more important one as far as I am concerned ] is the “sharp rise in the yen”. TWO the sharp decline in stock prices.
The BOJ is not scheduled for a policy meeting until the middle of next month but this adviser (Etsuro Honda) noted that the Central Bank would not wait until then if conditions warranted a meeting prior to that time.
If that were not enough, the main architect of Abe's economic program, Kozo Yamamoto suggested a coordinated international policy response to the current market turmoil. He noted that the rise in the Yen is due to Safe Haven trades and understands the reason behind it even if it is an “unwelcome favor” for Japan.
Lastly, Dow Jones is reporting that Bank of Japan governor Kuroda is visiting Prime Minister Abe for talks.
This is getting interesting indeed. Methinks Japan is setting the stage for something big. I keep saying that they are not going to tolerate a rising yen for long.
I am not quite sure how the markets would respond to all of this. I can see stocks getting a boost but I am unsure how gold would respond. Since the Yen and gold are both moving in lockstep of late, anything that would work to push the Yen down would obviously be of the nature that it would encourage RISK TAKING again. That would seem to be on the surface negative for gold. However, anything that the Bank of Japan might do would work to undercut their currency but would the market see that as more Central Bank attempts to devalue their respective currencies driving money into gold as an antidote against currency debasement? Unclear…
This evening as crude oil has rallied up, stocks have moved higher, and as a result, the safe havens of this morning, the Yen, gold and bonds, are now all moving lower.
