Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 28 April 2016 at 11:14 GMT

Daily Shot: What happened in Japan? Team / Saxo Bank
  • BoJ surprises markets by sitting on its hands
  • Investors were pricing in stimulus expansion
  • Japanese CPI print weaker than forecasted

By Walter Kurtz*

We begin with Japan where the central bank announced that it will be:

  1. Keeping the benchmark rate unchanged at minus 0.1%. 
  2. Keeping the monetary base target (maintaining the same pace of purchases). 
  3. Delaying the timing to reach the 2% inflation target. 

While many economists didn't expect much of a policy change, the markets were pricing in all sorts of "monetary goodies." These ranged from accelerated equity ETF purchases to a doubling of JGB purchases to LTRO-style lending to banks.

The markets reacted sharply to this disappointment, with the dollar-yen instantly giving up 2%. 

The Nikkei225 futures gapped down 3% in response to the BoJ announcement. 

Even in the US, the S&P500 futures fell. 

S&P 500
In other news from Japan, the nation's CPI report was weaker than expected. Economists are projecting further weakness in inflation – especially now that the yen has strengthened. 

Is the BoJ going back to the "drawing board"? 

Japan jobs/applications ratio continues to climb as labour shortages persist. Will this push wages materially higher? 

Turning to Food for Thought, here are the cities with some of the highest rent as a percentage of inhabitants' net earnings.  

— Edited by Michael McKenna

* Walter Kurtz is an alias

**This is an abridged version of the Daily Shot. To subscribe to the full version, link to the Daily Shot and select the appropriate command. E-mail addresses are never shared with anyone.


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