Japan Jumping the Shark

16-Sep-2010

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.







Looks like the pain was too great to bear for Japan and they have now decided to jump the shark and enter into a dangerous game of global competitive devaluations in support of their export-based economy.

Japan also had a miscue when they mentioned that the 82 yen is the ceiling for them which will invite speculators to test their resolve every time the Yen strengthens to 82.   I wouldn’t bet against the Japanese Central Bank.  The Yen should continue to weaken as the central bank continues to manipulate the currency markets by buying more dollars and selling the Yen.   The weak yen will help the Japanese exporters and therefore the Japanese stock market.  A quick and easy way to play this trend is to use ETFs to Go Long Japan equities and Go Short the Yen Trade.  For a list of ETFs please check out our free ETF list which will list the inverse Yen to long or short the regular Yen ETF and buy the Japan country ETF.

-Liu-Yue Lam

‘Big Mistake’ for Japan to Signal 82 Yen Barrier, JPMorgan’s Sasaki Says

By Aki Ito – Bloomberg

One of Japan’s top officials made a “big mistake” by indicating a barrier for the yen’s exchange rate against the dollar, inviting an attack by speculators, according to JPMorgan Chase & Co.

Chief Cabinet Secretary Yoshito Sengoku, asked at a press conference in Tokyo whether the 82 yen per dollar level was being defended, said “that’s what the finance ministry seems to think.” Japan yesterday intervened in the currency market for the first time since 2004, selling yen after it reached the highest level since 1995.

“It’s inevitable that the yen will strengthen again, and the yen at 82 will become the focus for speculation that the government will intervene again,” said Tohru Sasaki, head of Japan rates and foreign-exchange research at JPMorgan, who earlier this week said intervention odds had doubled after the conclusion of Japan’s ruling party leadership contest. “Once the yen breaks 82 we could see a jump all the way to 79.75.”

The yen tumbled from a 15-year high after the government’s move to curb gains that threatened an export-led recovery. The decision came a day after Japanese Prime Minister Naoto Kan won re-election as the head of the ruling party, beating a candidate who had insisted intervention was necessary.

The yen slid pared yesterday’s losses after the currency tumbled the most in 22 months. It was as strong as 82.88 yesterday before the government intervened, the highest level since May 1995.

‘Really Stupid’

Sengoku’s remarks prompted lawmaker Yoshimi Watanabe, leader of the opposition Your Party, to say today in Tokyo the comments were “really stupid,” the Yomiuri newspaper reported.

Sasaki, who is based in Tokyo and is a former head currency trader at Japan’s central bank, added that Japan’s decision to intervene won’t effectively curb the yen’s gains.

“Obviously the exchange rate could move by 1, 2, 3 yen in the short-term, but in the medium-term it can’t change the overall direction” of the currency, Sasaki said. “Also, this will make the exchange rate more volatile,” something that could end up being a “negative” factor for the country’s economy, he said.

Speaking to reporters after the government intervened, Finance Minister Yoshihiko Noda said yesterday he is prepared to take “bold actions including further intervention” if necessary. He declined to comment on currency markets and intervention when asked about the yen today.

The Japanese intervention “shows the amount of pain they’re in” and will likely have the government’s intended effect, said Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London. “You’ve got to go with it when MOF intervenes. The yen is going down to 110 in two years.”

To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

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