Nikkei 225 fireworks at BOJ monetary policy
Huge volatility in Nikkei 225
BOJ Monetary Policy Statement and Interest Rate Decision today. 5-minute action huge volatility with 600+points high to low.
This kind of ‘calm’ and ‘efficient’ all now part of the new normal.
- 15 January 2015 SNB removes EURCHF peg.
- 15 March 2015 EURUSD explodes 400 pips in 3 hours following FOMC.
- 11 August 2015 PBOC devalues RMB.
- 24 August 2015 Black Monday.
- 4 January 2016 China stock indices limit down.
- 24 June 2016 Brexit.
15 minutes later, “No BOJ rate cut, no hike in QE”.
In my opinion no more QE ever
Even as a layman, it is immediately obvious to me that BOJ is at the end of the road for monetary policy. Japan is in a terminal decline but her problem is structural, demographic.
In terms of innovation, South Korea has overtaken them. In terms of labour cost, China has a huge labour force that is highly educated, cheaper and younger. Maybe Japan got away with devaluation from 2013 – 2015. But the day PBOC fired up her own devaluation engine on 11 August, the game is over for Japan. Here you are running a 3-year long devaluation and your giant, better equipped neighbour just got started. If you don’t ease the pedal, it’s tit for tat until both of you run into the ground. Guess who is more likely to be the loser. That monetary quick fix is not a solution anymore. The issue is whether policy makers can admit their mistake or hatch even wilder schemes.