Currency wars again took another leap forward this week as Japan’s Economic Minister Wants Nikkei to Surge 17% to 13,000 by March.
Economic and fiscal policy minister Akira Amari said Saturday the government will step up economic recovery efforts so that the benchmark Nikkei index jumps an additional 17 percent to 13,000 points by the end of March.
“It will be important to show our mettle and see the Nikkei reach the 13,000 mark by the end of the fiscal year (March 31),” Amari said in a speech.
“We want to continue taking (new) steps to help stock prices rise” further, Amari stressed, referring to the core policies of the Liberal Democratic Party administration — the promotion of bold monetary easing, fiscal spending and greater private sector investment.
The key index started rallying from around 8,600 points in mid-November when then-Prime Minister Yoshihiko Noda decided to hold a general election Dec. 16 that saw his ruling Democratic Party of Japan trounced by the LDP. Share prices have risen largely in response to the yen’s depreciation against other major currencies on expectations for aggressive monetary easing measures by the Bank of Japan since the LDP’s return to power.
Contender for Bank of Japan Supports Additional Easing
In addition to stock market cheerleading and targets from Japan’s economy minister, Yen Weakens as Candidate for Bank of Japan Promotes Easing.
Japanese stock futures rose and the yen weakened after Haruhiko Kuroda, a potential contender for Bank of Japan chief, said additional monetary easing can be justified this year.
“If we do see a BOJ Governor of Kuroda’s calibre, the dollar-yen could well punch through 95 and would head to 100 very quickly,” said Evan Lucas, Melbourne-based market strategist at IG Markets Ltd., a provider of trading services. “It would also signal to Japanese consumers and investors alike that the government is finally taking action.”
For the record, I have been in on a long Japanese equities, short the Yen play for quite some time.
Yet, I do not pretend to know whether or not the Nikkei will soar another 17% by March. However, I do know that it is economically foolish for politicians to hijack currencies and stock markets. Thus, my positioning is certainly not an endorsement of Japanese policy.
At some point, and perhaps we have crossed the point already, currency wars can and will get out of control. If and when that happens, the Yen will spiral downward out of control, with energy prices (in Yen) skyrocketing. Moreover, Japanese exports may not necessarily rise as everyone believes.
Sentiment is a powerful thing. Convincing everyone in Japan that a huge outburst of inflation is on the way, is not the brightest thing to do, to say the least. As I have stated many times, Japan better be careful or it may get (and then some in spades) more of what it seeks.
Mike “Mish” Shedlock