politics

Market bears bet on Abe victory, then a yen disaster

47 Comments
By Hideyuki Sano

The requested article has expired, and is no longer available. Any related articles, and user comments are shown below.

© (c) Copyright Thomson Reuters 2014.

©2021 GPlusMedia Inc.

47 Comments
Login to comment

Abe and his supporters say his policies have created jobs,

Job's? Right outsourced contracts through yakuza contacts to hire PT under paid people to do "jobs" that no one else wants. Plus hourly wage service related industry positions to keep the impression that unemployment is down.

BS!

16 ( +19 / -3 )

Reuters interviewed some pretty dodgy characters for this piece. Im surprised they didn't talk to Bernie Madoff.

"Fujimaki, who came to fame in the late 1990s on his call that Japanese government bond yields would fall below 2%...."

They forgot to add that Soros fired Fujimaki, godfather of the "widow maker" trade, after he burned through tons of investors' money on a bet that never happened.

FT: "Takeshi Fujimaki has been wrong for a decade and counting."

12 ( +17 / -5 )

Abenomics is simply class warfare policy and sadly in the election on Sunday the declining middle class will vote against their own interests when they either choose Abe or stay home.

12 ( +14 / -2 )

I heard this morning the 3 arrows policy renamed "Abegeddon", made me laugh...

11 ( +11 / -0 )

Minister Shinzo Abe this weekend looks like a safe bet, but some are betting that the consequences for Japan could be calamitous - a collapse in the yen and uncontrolled inflation.

It seems the only people that don't believe this are Abe and his cronies. They are trying to fill corporate coffers at the expense of the workers and also to recover their huge debt from the same workers they owe the money to. The logic of Abenomics is absolutely daft and has been destined to fail from day one!

10 ( +14 / -4 )

Gotta hand it to Japan when it comes to "beating the wall believing it will turn into a door", I can already see the samurai's ganbaru spirit there.

8 ( +11 / -3 )

So the end game is money pours into stocks to continue lining the pockets of the bankers etc, and inflation the reduces the spending power of the remaining 99%. And what's more crazy, people will be voting to keep these clowns in power.

8 ( +8 / -0 )

I've been shorting the Yen. It will fall further, it's out of Japan's control now. Foreigners who can get out their money now, should get them out of the Yen or else risk losing more. Japan is no longer a rich country, it is becoming a poor one. They should not even host the 2020 Olympics when that money could have been used better elsewhere. Instead, they're taking on more debt. Absolutely crazy nationalistic.

6 ( +12 / -6 )

The most valuable right a Japanese voter has is the right to vote, to choose the leader that will protect his or her freedom , way of life, health, etc.. If you do not vote, or if you vote for Liberal Democratic Party of Japan, Komeito or Party for Future Generations. Do not complain when : (1) The government hides illegal activities, radioactive contamination, missing pension fund records, illegal military operations outside Japan, corruption, bribing of officials, etc. from you and the press using the state secrets laws. The government under LDP has hidden from the public things like allowing US ships to bring atomic weapons to Japanese waters, missing many people's pension records, corruption, etc. (2) The government has "reinterpreted" the Constitution to give it the right to send Japanese military to fight outside Japan. The Constitution requires any amendment "must be approved by at least two-thirds of the members of both Houses and be approved by a majority of voters in a referendum. PM Abe has violated the Constitution. This reminds me of Hideki Tojo. The government sends your sons, daughters, brothers, sisters, grandchildren, etc. to fight wars in foreign countries. They may be killed, permanently disabled without arm, legs, etc. The government raises taxes on "you", forcing "you" to help pay the these military adventures.

(3) Nuclear power plants are badly damaged by earthquakes, typhoons, etc. leaking radioactive substances into the air, water, soil, the food you eat, etc. Big areas around the damaged power plants are evacuated and no people can live there for thousands of years, like in Chernobyl of Ukraine or Three Mile Island of the USA. The Chernobyl exclusion zone covers 2600 sq km or 1,004 sq mi. People die slowly from thyroid cancer, cancer, etc. and animals, plants and human babies develop deformities.

(4)The consumption tax, also called "sales tax" will be increased to 10% after the election, by Liberal Democratic Party of Japan and its ally Komeito. If your income is 40000 yen a month, you will have 36000 yen after tax to spend. Your standard of living will drop. Other political parties like the Democratic Party of Japan want to decrease or stop the increase in the "sales tax"

Only 53% of the voters voted in the 2013 election for the House of Councillors or Upper House. Go out there and vote. Do not protest after the election. The elected members of the coming election are going to stay in the Lower House for the next 4 years. There is "very little you can do" after the election.

Do not vote for Liberal Democratic Party of Japan. Do not vote for Komeito. Do not vote for Party for Future Generations. They all share the same policies above.

5 ( +7 / -2 )

Ya know, it is often said that Japan is sometimes a few years behind the latest trends, the gap has since been more or less closed since the internet became a common thing but, is Japan that far behind the times that she doesn't understand THIS........

“Once you realize that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are -- a simple upward redistribution of income, rather than a way to make all of us richer, as we were told.”

― Ha-Joon Chang, 23 Things They Don't Tell You About Capitalism

4 ( +7 / -3 )

When the poor get poorer then it seems that the rich in Japan won't be able to avoid them! And when the poor have less and less they take from the rich

Robin Hood

4 ( +4 / -0 )

Still, there is no disagreeing with the general premise of this article and that is the yen is, and has been on a downward streak due to government meddling in the free market. With such a rapidly large loss in consumption on the horizon due to the drop in population, the Japanese government has no other choice but to reduce its debt by yen weakness. My advice is buy gold or silver with any spare yen that you have and preserve your wealth going into the future....

3 ( +4 / -1 )

The continuation of “Abenomics,” a program of money printing and debt-funded spending to lift Japan from two decades of deflation and stagnation, is, they say, not just failing, but heading for disaster.

Sounds about right to me. Anyone who has a large percentage of their wealth tied up in yen-demoninated assets should be very nervous. Even if the Nikkei goes up another 10%, an additional 10% drop in the value of the yen would wipe out that gain. Feel sorry for the average salaryman, who's income has likely remained flat, yet the cost of fuel and food, do to the high % of imports, has risen. And now that vacation he's been saving for at GW in Hawaii has gotten 20% more expensive.

3 ( +7 / -4 )

Can't wait to see the Yen go down low as 200 to 300. Foreign companies then should swoop in and buy up all the cheap assets and troubled SME companies on the cheap, by the buckets load. Only then, will Japan change. I mean forced to change.

3 ( +8 / -5 )

(4)The consumption tax, also called "sales tax" will be increased to 10% after the election, by Liberal Democratic Party of Japan and its ally Komeito. If your income is 40000 yen a month, you will have 36000 yen after tax to spend. Your standard of living will drop. Other political parties like the Democratic Party of Japan want to decrease or stop the increase in the "sales tax"

The sales tax is not an income tax. You will have the exact same amount of after tax income regardless of whether or not sales taxes rise. The only thing that is changing is the price you pay on the things you purchase.

Whether or not your standard of living decreases will depend on multiple factors, the most important of which is the amount of inflation in the general economy and changes to your income. Japan's measurement of inflation takes into account the tax increases and its at about 1% right now.

And, nice of you to plug the DPJ. I see you conveniently forgot what party was responsible for the tax increase in the first place...hint, it wasn't Abe's party.

3 ( +5 / -2 )

"expects the yen to fall to 200."

Hey, then a cup of coffee in Japan will be almost as cheap for visitors as a cup of coffee in their countries, lol.

3 ( +3 / -0 )

Individually, Japanese people seem to have tons of opinions and ideas, more than 2 or 3 together and then any opinion is hidden, any question of choice not chosen and you can almost see the relief in faces when a "leader" type comes in and decides for them.

apply that to about 127,220,000 people living here and you can see why no one raises a voice. It seems to me that people here will defer to anyone who is a so called "leader" no matter how cak of a leader he or she is.

Lemmings.... over the cliff...

3 ( +3 / -0 )

The government will intervene then claim they did nothing

2 ( +3 / -1 )

Can't wait to see the Yen go down low as 200 to 300. Foreign companies then should swoop in and buy up all the cheap assets and troubled SME companies on the cheap, by the buckets load.

Why the heck would you want to see that????

2 ( +4 / -2 )

To those who are scared - don't be. Define what you are scared about, and then figure out a way to eleviate your worries. Just hoping for things to turn out great is a bit of a gamble.

hampton, agree with you muchly but on this:

There will soon be pressure on interest rates because no one will buy bonds with a yield of less than 1% in an economy experiencing forced inflation other than the hand-picked board of BOJ.

But the hand-picked board of the BOJ is now, since Halloween, basically in the process of monetizing all the debt, so interest rates won't necessarily go up. I feel it's the currency that will continue to bear the brunt of the policies.

Interest rates may rise when the BOJ ends QQE, if the government hasn't resolved it's fiscal issues by then. But with the government constantly delaying on these problems, the BOJ will probably have to continue QQE for a long time yet, and in the meantime I think the currency is possibly going to go lower than most people care to imagine as a result.

Of course, we never know what might happen overseas to give the yen some temporary respite.

2 ( +2 / -0 )

Takeshi Fujimaki has been peddling this same broken record for 15 years, and as for Espe and Maudlin they both clearly show they should not be allowed anywhere near other peoples' money. None have them have a clue what they are talking about, or how the bond markets and exchange rates actually function. Expect to see them all get whipsawed and lose their shirts when the market turns and starts moving the other way, as currency markets always do.

1 ( +5 / -4 )

"...so he has bought futures contracts on the Nikkei stock index while shorting yen futures in his $175 million USAA Flexible Income Fund."

An "income" fund shorting yen futures?

“I have structured a 10-year options trade that would pay for half my mortgage if the yen does indeed get to 200,” he said.

Both these guys sound like the type of money manager I'd avoid.

1 ( +2 / -1 )

Long term i agree. short term i got burned the other day when yenn went from 121 to 118.........

1 ( +3 / -2 )

yea with this happening, I see best long term strategy is converting all spare yen to more stable currency + establishing some tourism / food oriented business or a local product endorsement. Sales will be booming soon enough.

1 ( +1 / -0 )

To escape from the vicious cycle of rising and falling exchange rates, it was proposed years ago that the yen be redenominated and then fixed at parity with the US dollar, at the rate of ¥1 = $1. Things today might be very different if they had done so when the opportunity availed.

1 ( +2 / -1 )

Abe and his supporters say his policies have created jobs,

They are right but at the expense of full-time/with benefits positions which have been declining as corporate Japan has pushed to downsize it's full timers and replace them with part-time contract workers made much easier due to Juminto and Abe's deregulation and watering down workers rights under the employment laws and regulations.

Yes, Japanese may be able to find employment more easily since Abe stepped up to the mound but that means relocating to Fukushima and signing daily or one-month contracts with the yaks or if you're lucky, getting a job closer at home with Ronald McDonald at Micky D's.

1 ( +3 / -2 )

I don't think the yen will continue to fall. Too many companies are going to have problems with cost of supplies from abroad, and only the really large exporters are feeling happy. Small business just can't support this exchange rate, and they will force the issue. They, unlike voters, have a bit of power, and will get involved. I look for it to stabilize at 110-115 or so withing a few months.

1 ( +3 / -2 )

Farmboy Dec. 12, 2014 - 01:05PM JST

I don't think the yen will continue to fall. Too many companies are going to have problems with cost of supplies from abroad, and only the really large exporters are feeling happy. Small business just can't support this exchange rate, and they will force the issue. They, unlike voters, have a bit of power, and will get involved. I look for it to stabilize at 110-115 or so withing a few months.

It is out of the hands of both Abe and the BOJ as they have used up all their cards! Now we are all just going along for a roller-coaster ride, "Lookout everyone, no BRAKES!"

1 ( +2 / -1 )

It is ridiculous to have to follow such a dangerous policy. However, the clock has run out on the alternatives. There is no ability to substantially raise taxes, so the choices are default or monetize. Default would be a disaster so cataclysmic that nobody can seriously contemplate it, so monetization is the only way. However, since the morons in Kasumigaseki have spent the last several decades stunting the capital markets, the only transmission mechanism is a Mickey Mouse banking system full of time-servers and incompetents.

Onishi-san is right to be scared.

1 ( +2 / -1 )

They are right but at the expense of full-time/with benefits positions which have been declining as corporate Japan has pushed to downsize it's full timers and replace them with part-time contract workers made much easier due to Juminto and Abe's deregulation and watering down workers rights under the employment laws and regulations.

This is a long term trend that has been going on for a good 40 years and has nothing to do with Abe's "deregulation" but more to do with huge shifts in Japanese society. I.e. the massive emergence of women into the labor markets on a part-time basis...among other things.

1 ( +2 / -1 )

Source on that?

The 300% of GDP debt stat by next year seems high to me, but that's just talking "really really bad" instead of "really really really bad".

As for the rest, he's right. Details can be found in a Japan Times article, "Put fiscal health ahead of politics", which notes balooning budget requests of circa 100 trillion yen, including record 25.8 trillion yen in debt-servicing expenses. The MOF might be able to trim the final budget a bit but it should be not much below 100 trillion. Then, estimated tax revenue figures of around 50 trillion can be seen here: http://www.mof.go.jp/tax_policy/reference/taxes_and_stamp_revenues/h201410.htm

1 ( +1 / -0 )

When I arrived on these shores in 1991, the yen was about 150 to the dollar - and now people look at a return to those days as a catastrophe. In reality, perhaps the intervening years have been unreasonable. Look at this graph of the yen/dollar exchange rate since the Plaza Accord, which unpegged the yen in 1985 (when it was about 260 to the dollar).

http://tinyurl.com/l85olqt

1 ( +2 / -1 )

Shorting the JGB, the famous "widow" trade that killed many traders even famous ones in past 20 years, may be the TRADE in 2015 or 2016. The boy who cried "wolf" was wrong many times, until everyone ignored him...then the wolf came. I note with interest Mr. Fujimaki who had been bearish on JGB prices for a long time, now instead is very bearish on the Yen. Will the "Last of the Mohican" story repeat soon?

1 ( +2 / -1 )

Japan is indeed undergoing a rough time at least economically and Prime Minister Abe whose re-election may be certain will have a trying time to find appropriate cures for economic ills in the days, months and years ahead! Also, the frosty relations with neighbours notably China and North Korea should also give him some headache though a cure is not out of his reach!

1 ( +1 / -0 )

If I had excess I would bet that the yen will be around this level this time next year. (5 ticks either side if that makes sense) Everything takes time here why would this be any different ?

1 ( +1 / -0 )

the yen will hit 140 to the dollar by the end of 2015 and will be between 150-160 to the dollar by the end of 2016

Wrong. The yen will probably reach 130 yen, 140 yen max, then stabilize at around the 110 mark in 3 years.

1 ( +2 / -1 )

Lots of people complaining about Abenomics, but nobody offering a credible alternative.

0 ( +3 / -3 )

some are betting that the consequences for Japan could be calamitous - a collapse in the yen and uncontrolled inflation. I'm certainly not voting for the LDP or Komeito in the upcoming election. In fact I never have in the past. However, the article is very, very SCARY for an average person like me. I just have to hope that the expert economists quoted in the article will somehow be proved wrong.

0 ( +0 / -0 )

Sorry 'Farmboy' but the Yen will not be returning to 100-115/US$ UNLESS Japan wants to slow exports and tourism which is rising at a rate beyond what the 2020 games were expected to do. Expect the Yen to range between 125 and 140 if Abe and company continue their 'plan' of semi-destruction of Japan's financial books to save the sinking ship but plugging the holes with pages from it.

0 ( +1 / -1 )

Farmboy, the yen will continue to fall, to the detriment of the Japanese economy. The government has embarked on the biggest QQE program in history in a deliberate attempt to crash the yen and reign in sovereign debt. Meanwhile the fed has decided to end its QQE program. Financial institutions like GS are betting the yen will hit 140 to the dollar by the end of 2015 and will be between 150-160 to the dollar by the end of 2016. After that, the slide is predicted to continue.

The LDP will win by a landslide on Sunday, mainly because the rural elderly chooses the government, but also because there is no real opposition to LDP. The results of this election will not affect markets much because we already know who will win and why. This election will be used by the LDP to "prove" that the Japanese populace supports government policy and we will have 4 more years of the same. The yen will continue to weaken and the wealthy will continue to pump money into the stock market, meaning Japanese and non-Japanese investors alike. There will soon be pressure on interest rates because no one will buy bonds with a yield of less than 1% in an economy experiencing forced inflation other than the hand-picked board of BOJ. If the interest on the debt rises more quickly than inflation, Japan has a spectacular problem on its hands. BY the end of next year the debt will be nearly 300% of GDP, well up from the estimated 245-260% it is currently at. The amount of tax required to service the debt therefore rises. It's already half of the country's collected tax revenue, or around 25% of total spending.

As the government struggles more and more to service its debt, taxes will inevitably rise and benefits will inevitably be cut, including the age and value of pensions. Anyone who is thinking of attempting to survive retirement purely on a Japanese government pension is borderline insane. The demographics here are the number one problem, but the government is elected by old fogies in the countryside so has no new policies for encouraging the birth rate. Japan won't crash though because the Japanese own most of their own debt. The value of savings will get wiped though and the slow decline will continue.

0 ( +4 / -4 )

Only then, will Japan change. I mean forced to change.

Even if an outside company purchased a Japanese company 100% the Japanese would still tell the new owners how to run the place into the ground.

0 ( +0 / -0 )

Upgrayedd Dec. 12, 2014 - 01:48PM JST

This is a long term trend that has been going on for a good 40 years and has nothing to do with Abe's "deregulation" but more to do with huge shifts in Japanese society. I.e. the massive emergence of women into the labor markets on a part-time basis...among other things.

Respectfully disagree. This has been the trend since the Ryutaro Hashimoto administraton amended the labor laws in 1998. Abe will do all he can to further them in huge form as Keidanren has his ear (balls) now and Rengo has been sent packing.

Temporary work (dispatched work) is governed by the Worker Dispatching Law (WDL) adopted 5 July 1985 and last amended 30 June 1999.

the Labour Standards Law (LSL). The LSL regulates firstly working conditions and secondly the workplace safety and hygene. The LSL was adopted on 7 April 1947 and last amended 30 September 1998.

the Labour Relations Adjustment Law (LRAL). The LRAL was adopted on 27 September 1946 and last amended 14 June 1988.

http://www.ilo.org/ifpdial/information-resources/national-labour-law-profiles/WCMS_158904/lang--en/index.htm

And the icing on the cake, Abe's worker-freindly labor law proposals! Try this link for starters.

http://japandailypress.com/tag/labor-laws/

0 ( +1 / -1 )

Financial institutions like GS are betting the yen will hit 140 to the dollar by the end of 2015 and will be between 150-160 to the dollar by the end of 2016. After that, the slide is predicted to continue.

That's not true.

GS's forecast is actually

2015 - 130 2016 - 135 2017 - 140

BY the end of next year the debt will be nearly 300% of GDP, well up from the estimated 245-260% it is currently at. The amount of tax required to service the debt therefore rises. It's already half of the country's collected tax revenue, or around 25% of total spending.

Source on that?

but the government is elected by old fogies in the countryside so has no new policies for encouraging the birth rate.

Birth rate has been steadily recovering every year from its low in 2004. One big reason is the increase in daycare capacity (a huge push from Koizumi's government) and promotion of flexible work schedules.

@ Mr. Perfect

Respectfully disagree. This has been the trend since the Ryutaro Hashimoto administraton amended the labor laws in 1998. Abe will do all he can to further them in huge form as Keidanren has his ear (balls) now and Rengo has been sent packing.

Sorry but that isn't true.

Let's look at the data. The following will be (Year) (% of non-agri labor force in permanent employment) (% in non-permanent employment).

1984 (84.7) (15.3) 1994 (79.7) (20.3) 1998 (76.4) (23.6) 2000 (73.8) (26.2) 2004 (68.4) (31.6) 2008 (65.4) (34.6) 2014 (62.9) (37.1)

That trend started a long, long time before Hashimoto.

0 ( +2 / -2 )

Nobody really knows what is going to happen. Let's start with that. Certainly the actions taken by the BOJ with quantitative easing are the cause of the drop in the yen. In addition, opening up the purchase of foreign investments to the pension plan basically means movement away from the yen and into the target currencies. That happened in a big whooosh, and you could hear the yen dropping. Now that it has, though, the amounts leaving will tend to be smaller and more measured.

The other part of all this is what is happening in Europe, and if things get really bad, that may cause massive INflux of currency into yen. In the USA, I really don't know... one minute things look like they are improving and the next, well, we'll see. If the US market tanks, or looks iffy, do you think all that pension money will stay there, or will it come limping back in a rush? The picture is complex, certainly. What CAN be controlled is government policy, and if it doesn't work the way they hoped, that can change. My guess is based on a belief that it WILL change. The weak yen solved some immediate problems for the big manufacturers, but it is killing everything else. It just won't fly long-term.

0 ( +1 / -1 )

Abe: the blind leading the blind

0 ( +1 / -1 )

some are betting that the consequences for Japan could be calamitous - a collapse in the yen and uncontrolled inflation.

Time will tell. I've got my "insurance" sorted out. Will be interesting on Monday to see the market reaction to whatever the result of the election is though.

The basic strategy of buying Japanese stocks and selling the currency, mentioned in the article, is hardly new, it's how all the foreigners have been making money on Abenomics for the past 2 years.

JeffLee,

They forgot to add that Soros fired Fujimaki, godfather of the "widow maker" trade, after he burned through tons of investors' money on a bet that never happened.

As the article says, this dodgy character was originally a trader, and I do believe that traders don't make money by being right all of the time. (But you are always right and never wrong so this may not make sense to you.)

I see your FT article was written the yen was 78 to the dollar, versus circa 120 now. Hmmm.

And your article also says (you'll love this), "most [experts] find it hard to disagree with his basic theory that the government’s borrowing – now exceeding Y1,003tn ($12.8tn), including state-guaranteed debt – poses big risks to the economy."

Where have you read that one before?

The article then talks about how Japan has it's own currency (which has since plunged in value), and the country's enduring current account surplus (which has been shrinking). Hmmmm.

Finally, concludes the article of August 8, 2012:

“Japan won’t roll over any time soon,” says Mr LaScala.

If I may... LOL!

-1 ( +0 / -1 )

Upgrayedd Dec. 12, 2014 - 03:10PM JST

Sorry but that isn't true. That trend started a long, long time before Hashimoto.

Please provide the source for youre statistics.

-1 ( +0 / -1 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites