• It's Coming...

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

#BeliefSystem Breakdown | Negative Rates: "There's No Doubt It Was Poison"

 #BeliefSystem Breakdown | Negative Rates: "There's No Doubt It Was Poison" - central bank kool aid 06.09.2016

"I don't think it was wrong to adopt negative rates," said Masahiko Shibayama, aide to Japanese prime minister Shinzo Abe, discussing the BOJ's negative interest rate policy. "But looking at what has been happening, there's no doubt it was poison," he said, referring to the public's dissatisfaction with the policy.

Can you believe it?

We can. We've been saying for a while now that the central planning #BeliefSystem is breaking down. With the disillusioned Japanese public railing against the BOJ's policies, it's no surprise that the Nikkei continues to crash as the Yen strengthens. Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today: 

"How about blaming the #BeliefSystem (that central market planners can arrest gravity) breaking down as growth slows? That is Japan. Yen up another +1.2% vs. USD and Nikkei smoked for another -1.9% loss overnight, taking it’s crash from the Global Equity #Bubble peak (2015) to -26.4%."

Outside of Japanese equities, Yen strength wasn't what the BOJ had in mind either. But that's what they got. The USDJPY cross is down -18% in the past year alone.

#BeliefSystem Breakdown | Negative Rates: "There's No Doubt It Was Poison" - usdjpy 7 6

As the BOJ failures mount, the central-planning justifications are getting truly bizzare.

Consider this argument from Kazuo Momma, a former top BOJ bureaucrat, via Reuters:

"One positive from three years of aggressive money printing was a recognition among the public that monetary policy alone cannot cure all ills. 'In the past, everything bad about the economy was blamed on the BOJ. Now, there are people saying that structural reforms are equally important,' Momma told Reuters. 'There's no quick fix. The most sustainable and definite way to boost Japan's potential and heighten people's confidence is to patiently pursue structural reform, even if that takes time.'

 

After decades of failure, what makes Mr. Momma so sure central planning can fix Japan's ills?