We all knew it was happening — in reality if not in name. Today, it came one important step closer to being official.
Shortly after Japan issued JGBs, the BoJ scooped in and bought them (¥400 billion worth) — bringing their ownership close to 50% of all outstanding 10Ys. In other words, the BoJ is now that much closer to officially financing Japan’s staggering deficits. Normalizing, indeed.
The effect on the USDJPY wasn’t all that significant. It was more the realization that the BoJ has had to resort to extreme measures — something Kuroda swore he’d never do — lest they totally lose control.
Together with the BoE hiking by 0.25%, it was more than the algos could bear. Futures are off 14 points and have completed the H&S Pattern we’ve been watching develop.
As oil and gas continue tumbling toward our downside targets, there should be more downside for stocks ahead.
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