Update on Japan : Reflation "all in"
Next to the extreme money market measures already been put into action, more measures have been taken to keep the engine running :
1)G7 announcement effect of coordinated intervention :
"In response to recent movements in the exchange rate of the yen associated with the tragic events in Japan, and at the request of the Japanese authorities, the authorities of the United States, the United Kingdom, Canada, and the European Central Bank will join with Japan, on March 18, 2011, in concerted intervention in exchange markets. As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We will monitor exchange markets closely and will cooperate as appropriate."
-Market reaction: strong reversals from risk-of to risk-on :
EUR/JPY weakens from 110 to 115 and $/JPY back above 80 (81,5 - 76,25 low) ; hopefully not a one-off effect.
Strong upward correction on European crude to a new 2011 high of 116,5$ (Tuesday 110).
Long rates in conjunction with the sell-off yesterday are back to square 1 or the level of the crisis outbreak
Stock markets creep higher and will most likely close the week unchanged on these events and intervention measures (Japan still minor loss of 4%)
2)The BoJ and the Japanese government also increase efforts in terms of domestic emergency measures:
The BoJ will pursue powerful monetary easing - meaning that quantitative easing is lifted to a higher level -and will continue to provide ample liquidity.
The government will issue JPY 10 trillion of earthquake relief bonds to finance the reconstruction, EUR 87 bio equivalent. These bonds will most likely be absorbed by the BoJ.
Fukushima: renewed white smoke appearing carrying not a good message ; power cable being put into place but no electricity generation yet.