The 1 economic experiment Shinzo Abe won't try Jeff Spross

Spoiler: MMT-informed fiscal policy.

The Week
The 1 economic experiment Shinzo Abe won't try

Jeff Spross

Sputnik — Merkel Offered Shinzo Abe NATO Membership, Reports Japanese Press

Say what?

Sputnik
Merkel Offered Shinzo Abe NATO Membership, Reports Japanese Press

USDJPY flying now. I called it April 7 when Japan announced its fiscal stimulus.

In my MMT Trader report of April 7, I recommended going long USDJPY. That trade now has a 200 pip profit.

That week, Japanese Prime Minister, Shinzo Abe, announced that the government would "front load" the nation's public works' spending to the first half of FY 2016, which has just begun.

Fiscal stimulus. Bearish for yen.

The yen had a huge rally leading up to that announcement. It started around Jan 28 when the BOJ went, stupidly, to negative interest rates. That move was intended to push the yen down, but it did the opposite.

The yen's rally attracted a lot of speculative long positions in the futures market. Spec longs hit the highest level in four years. Clearly, the yen was due for a selloff and the fiscal stimulus was the signal I was looking for.

Last week Japan suffered another terrible earthquake and now there is discussion of a supplemental budget for cleanup and reconstruction. This was also covered in the MMT Trader report.

By the way, it also recommended buying Japanese indices or stocks--some ADR's traded on U.S. exchanges.

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AFP — Japan's economy shrinks by 0.4% in a blow for 'Abenomics' growth plan

Japan’s economy shrunk 0.4% in the second quarter of the year, official data showed on Monday, underscoring how the prime minsister’s “Abenomics” growth programme has yet to grain traction.

Weak domestic consumption and slow exports weighed on the world’s third largest economy, which shrank an annualised 1.6%, after posting growth in the previous two quarters, according to the cabinet office.

However, the data came in slightly better than the market’s expectations for a fall of 0.5% and the main Nikkei stock market index was up strongly by 0.6%.
Private consumption, which accounts for about 60% of Japan’s GDP, fell 0.8%, as exports dropped 4.4%.

“The sharp plunge from the previous quarter’s surprise growth was partly due to disappointing demand for Japanese products in the US, Chinese and other resource-exporting markets,” SMBC Nikko Securities said in a commentary.

The Guardian
Japan's economy shrinks by 0.4% in a blow for 'Abenomics' growth plan

Agence France-Presse

Brian Romanchuk — The 'Widowmaker' And Yen Crash Theories

There has been a recent shift amongst those predicting the collapse of the Japanese economy to switch away from the so-called "widowmaker trade" - short Japanese Government Bonds (JGBs) - towards forecasts of a collapse in the Japanese yen (pictured above). Although this may result from learning a lesson from roughly two decades of failed "JGB collapse" predictions, I suspect that this is the result of learning the wrong things. Being structurally short the yen is hardly the safest trade in the world either.…

Bond Economics
The 'Widowmaker' And Yen Crash Theories
Brian Romanchuk

Japan PM "stimulus" plan: "Hey, BoJ, do more QE"

So Shinzo Abe is back in power, carried to victory on the promise of massive stimulus designed to bring the Japanese economy roarding back to life and end years of deflation.

Speculators jump all over the yen, selling it down to levels not seen in nearly two years.

And what's the big stimulus plan?

More Quantitative Easing. (Can somebody tell Abe and the specs that that hasn't worked for the past 10 years?)

The Bank of Japan should buy more long-dated government bonds and a wider variety of risk asset types, including foreign bonds, to achieve 2 to 3 percent inflation, Koichi Hamada, a special economic adviser to Prime Minister Shinzo Abe, said on Thursday. Read full story here.

If this is their plan, it's crazy. Just more of the same. I am long the yen. Wait 'til they restart the nukes and the country's trade deficit goes back into surplus.