In today's Macro Notes we talk about the rising correlation between Gold & S&P 500, preview tomorrow's Core PCE number and discuss our outlook for the Yen.
Regarding the yen, I have to disagree. inflation is a political issue, not an economic or financial one. from everything I have read (albeit I am not on the ground there) it does not appear that there is a huge uproar over the fact that inflation has moved from 0% to 2%. the weaker yen is clearly impacting that, but remember, Japan is still largely a mercantilist country and a weaker exchange rate helps it greatly. Mr and Mrs Watanabe are long stocks and happy with the current situation. while I think the MOF is concerned about a sudden collapse, and we will hear a great deal of jawboning, if we grind to 155, my bet is they will not enter the market. Clearly anything can happen, but absent a yen crash, there is more pressure on China as the CNY strengthens relative to the yen, than on Japan in my view.
Regarding the yen, I have to disagree. inflation is a political issue, not an economic or financial one. from everything I have read (albeit I am not on the ground there) it does not appear that there is a huge uproar over the fact that inflation has moved from 0% to 2%. the weaker yen is clearly impacting that, but remember, Japan is still largely a mercantilist country and a weaker exchange rate helps it greatly. Mr and Mrs Watanabe are long stocks and happy with the current situation. while I think the MOF is concerned about a sudden collapse, and we will hear a great deal of jawboning, if we grind to 155, my bet is they will not enter the market. Clearly anything can happen, but absent a yen crash, there is more pressure on China as the CNY strengthens relative to the yen, than on Japan in my view.