New Prime Minister Abe of Japan wastes no time - spending cap for the annual budget scrapped , JGB not amused !

http://www.zerohedge.com/news/2012-12-20/bojs-qe10-latest-japanese-dud-ahead-us-cliffhanger

BOJ's QE10 Is Latest Japanese Dud Ahead Of The US Cliffhanger

Submitted by Tyler Durden on 12/20/2012 07:01 -0500

• Central Banks
 
• China
 
• Consumer Confidence
• Creditors
 
• Equity Markets
 
• France
 
• Gross Domestic Product
 
• Jim Reid
 
• Nikkei
 
• Philly Fed
 
• President Obama
 
• Reality
 
• recovery
 
• Reuters
 
• Unemployment
• United Kingdom
 
• Yen

Very much in keeping with the tradition of Japan's now monthly QE8 (September) andQE9 (October), last night's announcement of what is effectively QE10, left a bitter taste in the mouth of salivating habitual gamblers (f/k/a traders), after Shirakawa showed he would not bend over to Abe's political demands just yet, and left out any mention of inflation targeting, whether 2% or 3%, out of the QE10 announcement. What he did include was yet another JPY 10 billion increase in the total asset purchase fund to a total of JPY 76 trillion, increasing the size of eligible JGB and Bill purchases by JPY 5 billion each. However, since this approach has proven to be a total failure in recent months, the market immediately faded the move and the USDJPY tumbled to under 84.00 overnight.

From Reuters: ""The reaction in the market is one of modest disappointment. Expectations of aggressive BOJ easing have been running ahead of reality," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi. "But there's probably enough in the (BOJ) statement to keep market expectations for more aggressive easing alive so that will probably keep any rebound in the yen relatively modest." Hardman forecast the dollar to trade at 86 yen in 12 months time and the yen's recent weakening trend was sustainable. The yen also regained ground against the euro, with the single currency falling 0.5 percent to 111.09 yen and retreating from a 16-month high of 112.59 yen hit on Wednesday."

*  *  * 

http://www.zerohedge.com/news/2012-12-18/abe-20-begins-step-1-remove-all-budget-limits-jgb-yields-crack

Abe 2.0 Begins - Step 1 Remove All Budget Limits; JGB Yields Crack

Submitted by Tyler Durden on 12/18/2012 19:55 -0500

• Aussie
 
• Trade Balance

Well that did not take long. T+2 days from his re-election, Shinzo Abe has summarily unbudgeted himself. As Kyodo News reports, the sphincterially-challenged wild-man has decided to scrap the country's spending cap for the annual budget. Previously capped at a measly JPY71 trillion (excluding debt-servicing costs) in an effort to create some pretense of fiscal discipline, the new Keynesian has unilaterally decided that moar is better. Not exactly helping, though perhaps exactly what the currency-war-inflaming Abe might like, the trade balance plunged yet again (to -JPY953bn from -JPY540bn) from  - setting a new all-time record negative average as the implicit capital flight continues. JPY weakness has resumed but it is the collapse in JGBs that will be worrying people - the biggest 5-day run-up in 10Y JGB yields in over 13 months.

10Y JGB yields are on a tear...breaking above the 100DMA...

Japan's Trade Balance pushes further and further south...

AsiaPac not having a great night overall with Aussie Leading Indicators plunging to their lowest in nine months...

and.......

http://globaleconomicanalysis.blogspot.com/2012/12/nikkei-rises-above-10000-yen-drops-to.html

Nikkei Rises Above 10,000; Yen Drops to Weakest Level Since April 2011

In a pair of related ideas, the Yen is sinking and the Japanese stock market is on a tear. Today the Nikkei crossed the 10,000 mark once again.

Yen Futures Daily Chart



click on chart for sharper image

Nikkei Futures Daily Chart

Yen Drops to Weakest Level Since April 2011

Bloomberg reports Yen Falls to August 2011 Low Versus Euro on Stimulus Bets. 

 The yen fell to its lowest level since August last year against the euro on prospects that the Bank of Japan will expand stimulus at the meeting that starts today, its first after the nation’s general election.

Japan’s currency traded near the weakest level since April 2011 versus its U.S. counterpart after data today showed the country’s trade deficit widened in November. The 17-nation euro maintained seven days of gains against the dollar that pushed it to a seven-month high yesterday amid optimism U.S. lawmakers will reach a budget pact, reducing demand for the greenback as a haven.

“Yen-selling is likely to remain intact,” said Koji Iwata, vice president of foreign-exchange trading in New York at Mizuho Corporate Bank Ltd., a unit of Japan’s third-biggest financial group by market value. “The BOJ will probably disappoint the market if it doesn’t boost asset purchases.”

In the race for currency debasement, Japan will soon pass the Fed. Repeating what I said yesterday in Spotlight on Japan

Since Mid-November the Nikkei has been on an upward tear. The Yen has been in decline since the start of October.

Both trends have favorable fundamentals, and both are worth watching.

Mike "Mish" Shedlock