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Nov 19 2014, 11.10am GMT


As the Bank of Japan issued statements today on the back of recession news, continuing fiscal policies pushed investors to seek safer climes.

Japan in recession

With an economy shrinking by an annualized 1.6 percent in the third quarter, with a currency dependent stimulus of QE continuing, and with pension reforms that allow more money to exit the country, the yen is now at its lowest in seven years against the dollar. Now Prime Minister Shinzo Abe has postponed a second tax hike, is dissolving parliament and calling snap elections in mid-December. Against this volatile backdrop, the Bank of Japan issued a statement today announcing ongoing policies of:

  1. purchasing government bonds “so that their amount outstanding will increase at an annual pace of about 80 trillion yen.”
  2. purchasing exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 3 trillion yen and about 90 billion yen respectively.
  3. maintaining CP and corporate bonds amounts outstanding at about 2.2 trillion yen and about 3.2 trillion yen respectively.

Further statements from BoJ announced that the bank will adjust economic projections in line with growth assessments. Shinzo Abe also added that he would be submitting a further bill for additional budget in 2015.

The losers:

  • Japan 225 [Nikkei] down -0.32% at 17,289
  • USDJPY 117.32 (116.86)
  • Sony down 1.5%
  • With the stronger dollar, gold is down $3 to $1,194 an ounce and attempting to break the resistance level
  • Oil continues its trend down to a fresh 4-year low of $74

Safer climes

As money starts to shift away from Japan and the Asian indices, the US with its strong dollar is picking up much of the floating investment. The American exchanges are seeing the benefits with NASDAQ, DOW and S&P all at new highs. In Europe there were also positive figures from the German ZEW influencing the DAX to gain momentum on an upward shift.  The FTSE also took a turn up and the France40 [CAX] continued its recovery on the back of good GDP data though, at close of market it had lost about a third of its increase from the start of the week.

The winners

  • USA 30 [DJIA] up +0.23% at 17,688
  • USA 500 [S&P 500] up +0.51% at 2,052
  • France40 [CAX] up from 4154 to 4244 from start of week
  • Germany 30 [DAX] up from 9228.50 to 9447.00 from start of week

MT4 chart USDJPY

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