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With rates effectively at zero, Japan is back at to being who they are. Politicized/Compromised bureaucrats, creating zero capitalistic incentive.

Less than one month after BOJ Governor Masaaki Shirakawa told reporters that ``an additional rate cut would have many adverse effects on the functioning of the money market'' he and his team have lowered the benchmark overnight rate to 0.10% and announced that they will follow the lead of US central bankers and begin buying commercial paper in an attempt to jump start liquidity.

Shirakawa obviously didn’t want to take these steps, he had no choice. With automotive firms guiding down massively for 2009 kick starting a new Japanese layoff cycle and the most recent Tankan manufacturing survey down by the largest period margin since 1975 -the pain trade is in motion. This is why the Nikkei traded down on the day despite the cut.

We continue to be short the Yen via the FXY ETN and will keep our eye on Japanese equities with a short bias into any strength.

Andrew Barber
Keith McCullough

Research Edge LLC