BOJ *was* the real culprit I think

[blazespinnaker]

Thanks for EJ posting the link on the homepage.

I agree... I think the fed gets too much blame/credit for what is going on in the world, inflationary speaking.

I think because of carry trade and far too low interest rates a lot of yen has flushed into the world economy. People have been massively borrowing yen and purchasing up bonds in other places (like the US) creating artificially low long term interest rates.

The US did something similar under volker, but in the reverse. Rather than flushing the world with liquidity they crushed the world with an overly high interest rate ..

countries like the US and Japan are the elephants in the room, they can wreak massive havoc by having fed policies which are either too restrictive or too stimulative.

[jk]

i think the boj theory has some merit. i must say i'm surprised. there has been talk about the coming end of the yen carry trade for many weeks, but on reflection the carry trade looks like it would still be pretty good even if jgb's started paying some real interest. that is, japanese rates will still remain relatively low [relative to european and u.s. rates], so the carry trades should still work. there must in addition be some fear of the yen strengthening.

[blazespinnaker]

unwinding the carry trades takes time, and it'll be too late once the boj makes a big move, so you really have to be ahead of the curve on this.

It's one of the reasons, I think, the boj is dragging their heals.. they're really sounding the alarms to make sure everyone has a chance to exit their positions.

[jk]

makes sense. fits with the upward movement of yen in recent weeks.

http://futures.tradingcharts.com/chart/JY/W