Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who wrote (53378)	7/14/2006 1:49:47 PM
From: YanivBA	Read Replies (3) of 116555

Major fluctuations yesterday in the Yen monetary base. After draining approximately 20 trillion Yen from the monetary base (about 17% of the monetary base or 60% of the current account balances) the Bank of Japan returns 4.7 trillion Yen into the market in just one day. They didn't plan it either. The projection of BoJ for yesterday was to put out a normal figure of 0.7 trillion yen. The day to day projections and actual changes in the Yen current account (the part of the monetary base targeted by the former quantitative easing) can be found here: www3.boj.or.jp Projecting 0.7 and then putting out 4.7 seems quite a mismatch. A ~50% rise in the current account does not happen by accident. We note that after the mid-May shake down they where very careful approaching the 10 trillion yen water mark (where people started accusing them of the drop in the market). Yesterday alone takes us from 11 trillion Yen to 16 trillion Yen. Could it be that someone panicked over there as the Nikkei did not respond as expected to their dovish promises? Sunday promises to be interesting as well as the projection is for a sizable withdraw of 2.8 trillion Yen. In my mind if they don't follow through on the projection on Sunday that's another incremental signal for the return of the Yen carry trade. What do you make of it, Mish? Can you figure out if the expected rise in the dollar will be enough to outweigh the implication for the return of risk appetite? What would you say are the chances this money finds the way into short positions (as in "The next bull market is in short selling.")? YanivBA

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