One of the big stories of the last 6 months has been “Abenomics.”
This is the moniker given to the economic regime being imposed by Japan’s new Prime Minister Shinzo Abe, who hopes to revive the country’s weak economy via fiscal stimulus, monetary stimulus, and even structural reforms. You can read a complete guide to it here.
Anyway, in financial markets Abenomics has been greeted enthusiastically.
The Nikkei has been a prime mover. And the belief that the Bank of Japan would finally lower real interest rates significantly was causing the yen to dive (something that exporters have been happy about).
But in recent weeks the Nikkei has gone nowhere, and the yen is strengthening again.
Check out this chart going back to October of the dollar vs. the yen. It appeared to be making a bee-line to 100, but in recent days the dollar has fallen markedly.
FinVizThe Nikkei also fell hard last night.
It seems that right now there’s a gap between what the markets have been anticipating and what the real economy is showing.
There are some signs of improvement, but other signs that things are still just meh, such as last night’s quarterly “Tankan” report on Japanese manufacturers.
The Bank of Japan meets this Wednesday under its new boss, so that will be interesting. But what people will really want to see now is some real world improvement.