Posted on 03/17/2011 4:56:32 PM PDT by bruinbirdman
Japan is in imminent danger of a credit-crunch with global implications unless the authorities stabilise Tokyo's stockmarket and take overwhelming action to stop the yen exploding to record levels.
Akito Fukanaga from RBS warned of a "financial shock" as banks and insurers comes under strain, and investors focus on the nexus of structured products linked to the yen.
"Preventive measures on the financial front are urgently needed. Sentiment has declined severely and there are concerns over capital erosion at financial institutions. Lower stock prices and yen appreciation are on the verge of triggering a credit crunch," he said.
The yen's violent move late Wednesday to a record ¥76 against the dollar - smashing historic lines of resistance - has gone far beyond levels that automatically set off secondary effects through derivative contracts.
The Topix index has regained some ground after crashing to 782 but is still at levels that leave Japan's top three banks barely above water on $1 trillion of equity holdings. The risk is that they will curtail lending as a precaution.
The Bank of Japan has already injected ¥15 trillion (£117bn) in liquidity and pledge to boost quantitative easing to ¥40 if necessary, but even this may not be enough.
The G7 finance ministers were to hold a conference call last night to discuss possible intervention to stabilize the yen, perhaps at bearable levels of ¥80 to the dollar. But there seems little consensus yet on the scale of action needed. Dow Jones cited a Japanese official pledging "battle" to cap yen strength.
The channel of contagion from Japan to the rest of the world is finance, not trade, just as it was during the US sub-prime crisis. The trigger mechanism is the rising yen, which eats into profits and hits share
(Excerpt) Read more at telegraph.co.uk ...
Don’t they hold large amounts of our debt/T-bills, etc?
Dollar get better or worse?
Ambrose Evans-Pritchard is the perfect example of a drama queen, running around in circles, flapping his arms and crying that his dolly didn’t get a tea cup at the little girl’s party.
I hope that someday Ambrose is dropped in the African savannah to deal with hyenas with stone tools that he must make himself.
This is an article well worth reading, particularly for the cogent analysis and for its sound historical view of the yen-dollar trade over the last 15 years.
Since Monday, Goldman has brought in four members of its global management committee to the Tokyo office. “The Goldman Sachs message is that we are staying.”
I am still waiting for his Eastern Europe collapse promised 3 years ago. Or... maybe I missed that one...
Priceless.
1,000 years? How did you reach this conclusion?
Notice how the Bank of Japan injected $15 TRILLION yen into the Japanese economy in just three days?
Most would incorrectly call this VERY inflationary, bordering on hyper-inflationary (maybe even crossing that line).
Instead, the yen is strengthening out of control.
We are in deflationary times - not inflationary. People incorrectly perceive higher prices as inflationary. They are instead signs of desparation from companies seeking to stay afloat.
You've got to be kidding!
Have you seen what's going on in Japan?
Besides, if what you say is true then it would be reflected in a VERY large way in the EUR/USD ratio. It isn't.
The US Dollar Index is decreasing solely due to a strengthening of the Euro and most recently yen. That's it. (And that doesn't bode well for either of those currencies).
0bama’s fault
tag line
Is that some kind of weird symbolic message?
No I think they are sending their aces south and bringing in the reinforcements.
worse. They are said to be selling their US Treasuries to raise cash.
It was said Obama’s fault......as in earthquake. His planners did not plan on this
What’s going to hell is the Dollar, not the Yen.
The Japanese problem is that they are holding dollars (Bonds, treasuries, etc.) that are going to hell.
In order to raise capital for Japan they have to acquire yen by selling U.S. Bonds. This is the equivilant to “buying” Yen with the U.S. Denominated Bonds. This demand for Yen causes the price to rise in general and specificially against the Dollars they are selling (via Dollar Denominated Bonds.)
“Why would the Yen be so popular when the country is in shambles and about to go radioactive for 1,000 years?”
It makes absolutely no sense whatsoever to me. Especially since the Bank of Japan just printed the equivalent of two hundred billion U.S. to prop up their stock market, and presumably will keep printing for the purpose until the yen is worth less than the paper it’s printed on.
“Why would the Yen be so popular when the country is in shambles and about to go radioactive for 1,000 years?”
This is what happened here in 2008. People needed to raise cash to meet margin calls when Lehman fell.
In this case, the Japanese need cash to fix their country. So, they are bring their money home. When you have a whole country doing that, it increases the value of that currency, even if in the near future the GDP will be falling. They are selling off whatever they can to raise their personal cash levels.
It is very deflationary, and similar in the panic for cash that we experienced in 2008.
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