We’ve talked about the Bank of Japan’s newly amplified role as the shock absorber to the global economy, as they execute on their license to print unlimited yen and buy unlimited assets.
Remember, the global finance ministers (and politicians) have resolved that, in a world of global interconnectedness, the only way to avert the spiral of global economic crises into an apocalyptic outcome is to coordinate policies.
Japan is in the unique position, after battling decades of deflation while buried under the world’s worst-debt burden, to be the implicit provider of global liquidity — to keep printing, to devalue the yen and inflate away debt.
With that, let’s take a closer look at the yen and Japanese stocks.
As we discussed on Tuesday, since the Fed start the rate liftoff in March, the yen has crashed as much as 17% (in just three months). By April, the Japanese currency had already posted a record losing streak against the dollar. It hit a 24-year low this week.
Strong dollar/weaker yen is the consequence of the policy divergence between the U.S. and Japan (the Fed tightening, the BOJ easing).