No Nonsense | 2 Charts: The Japanese Equity Pop & Helicopter Money Musings

Takeaway: In the last seven days of trading, the Nikkei is up +10.7% and USDJPY +5.5% on helicopter money speculation. That's a mirage.

No Nonsense | 2 Charts: The Japanese Equity Pop & Helicopter Money Musings - Abenomics cartoon 02.25.2016

 

Last week was an undoubtedly good week for Japanese equity bulls.

 

Conflicting rumors from Japanese officials stoked "helicopter money" speculation and the bulls cheered. In the last seven days of trading, the Nikkei is up +10.7%. Unsurprisingly, the Yen weakened (USDJPY: +5.5%, over that same period). But hang on...

 

Take a deep breath.

 

Before dogpiling into Japanese equities, consider the broader trend not dictated by helicopter money hot air and speculation. The Japanese economy continues to slow. Today, the IMF lowered its 2016 estimate for Japanese growth to 0.3%, from 0.5% prediction in April. Not good. That also explains why the Nikkei is down -19.8% in the past year, inclusive of the recent pop.

 

No Nonsense | 2 Charts: The Japanese Equity Pop & Helicopter Money Musings - nikkei 7 19

Meanwhile...

 

The BOJ has been desperately trying to devalue the Yen in an effort to stimulate sluggish economic growth. That's the standard central planning playbook but it isn't working. In the past year, the yen has strengthened (USDJPY is down -14.6%), despite the ¥80 to ¥90 trillion in quantitative easing. That's roughly equivalent to 16% of Japan's gross domestic product. Again... not working.

 

No Nonsense | 2 Charts: The Japanese Equity Pop & Helicopter Money Musings - usdjpy 7 19

All things considered, it's worth asking yourself...

 

Can Japanese central planners actually stimulate economic growth or is helicopter money merely a mirage?


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