Turbo Tokyo

As we touched on yesterday, Friday saw the extraordinary announcement by the Bank of Japan (BoJ) of an increase in its stimulus program given the last one wasn’t working.  Some perspective is handy here as one can get lost in Yen and $billions.  Even though Japan is the world’s 3rd biggest economy (4th if you include Eurozone as one economy), if you applied the now $750b annual money printing program to the US on a like for like GDP basis, it would equate to being 3 times larger than the biggest year of QE3, $3trillion.  This for a country that already has a debt to GDP ratio of an incredible 250%, or a BoJ balance sheet which is nearly 50% of the country’s total income (and again for context the already bad US is only about half of both those figures).  To add to this madness, the state owned pension fund (GPIF) is reducing its Japanese government bond holdings from about 60% to 35% in order to fund a massive share buying program.  So of course shares rallied (including the US as about $1.8trillion is slated for international shares), bonds didn’t tank (indeed rallied!?) because the BoJ has stepped up its bond buying to print more money, the Yen plummeted against the USD (now out to a 7 year high 114 USD/Yen), which of course saw gold down against the strengthening dollar.  The inescapable irony is that gold went down despite the core reason for the USD rally was Japan stepping ever closer to an inevitable collapse and the global economic ramifications that presents.