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…
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?
More of what hasn’t worked but in bigger quantities.
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