The Phaserl


Gold, Japan, and the Last Fake Rally

by Gerardo Del Real, Outsider Club:

By the time you read this the Fed will most likely have stayed put on raising rates, but will begin to take a tougher stance on the possibility of a June hike.

The real action is today as the Bank of Japan issues its policy decision.

Despite a negative interest rate policy and decades of loose monetary policy, Bank of Japan Gov. Haruhiko Koroda has been unable to deliver on his promise of 2% inflation.

And in fact the yen is actually 8% higher than in late January, when negative interest rates were first introduced.

We don’t need a crystal ball to see how this ends, we just need to ask very simple questions…

Simple Questions

Can the BOJ continue to allow the Yen to strengthen vs. the dollar? No. Because a stronger Yen is too detrimental to exports, which Japan relies on heavily.

The 2% inflation target is now closer to zero than two. What options does the BOJ have to make the Yen weaker?

Japan Inflation Rate ChartMore of what hasn’t worked but in bigger quantities.

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