Deutsche Bank in ‘free fall’ with the “third arrow of Abenomics flying wide of the mark”

Deutsche Bank in freefall

Deutsche Bank in free fall

So again, how can you force manufacturing and the sale of manufactured goods when no one is buying the manufactured goods during what few will admit is a depression? And then the second question is: How can you increase consumption when the consumption tax is raised from 5 percent to 8 percent and then again with a coming expected further increase to 10 percent? Yet, the BoJ continued cranking out billions in QE (easing) which led to Deutsche Bank (because Deutsche bank is highly leveraged with US$75 trillion in derivatives) issuing a warning to BoJ. Once bank panic sets in look out because it is contagious with European banks including Deutsche Bank now in free fall according to Zero Hedge. Deutsche Bank has been paying off on lawsuits to prevent its exposure of its risk on derivatives. And as Jim Willie recently stated: “If Duestche Bank goes under it will be Lehman times five.” But to be fair with Haruhiko Kuroda’s Bank of Japan head, he did warn that the “BoJ is out of ammo” after he returned from Devos, Switzerland a few weeks ago.

Source: The Japan Times

"What did Deutsche Bank warn? No more easing or we will be trapped?"

“What did Deutsche Bank warn? No more easing or we will be trapped?”

Bank of Japan Gov. Haruhiko Kuroda attends a news conference at BOJ headquarters in Tokyo in January. | REUTERS

Economic jump-start sputters as ‘third arrow’ of Abenomics flies wide of mark

February 9, 2016

When Prime Minister Shinzo Abe launched his three-pronged program to revive Japan’s stagnant, deflationary economy three years ago, the stock market cheered every step along the way.

Not any more.

The “third arrow” of Abenomics — reforms to make the economy more productive — is barely a work in progress, but Abe got straight to work on the first two, fiscal expansion and monetary stimulus, with the enthusiastic support of a new governor at the Bank of Japan, Haruhiko Kuroda.

In the first year of the program, the Nikkei index jumped nearly 60 percent, drawing in a net ¥15 trillion ($128 billion) in foreign cash. Enthusiasm for Kuroda’s bold stimulus, in particular, was strong, with each of his first two money-printing announcements prompting a 7 percent weekly surge.

His decision last week to introduce negative interest rates was equally bold, and quite unexpected, but as Abe’s arrows have sailed wide of their target, investors have sat on their hands.

“The market’s reaction is getting duller day by day. The negative interest rates boosted the market only for two days,” said Norihiro Fujito, senior investment analyst at Mitsubishi UFJ Morgan Stanley Securities, and trading data show even that was down to short-term “gamblers,” he added.

A week later, even those gains are gone, as foreign investors withdrew a net ¥207 billion from the market, taking their total for 2016 to more than ¥1 trillion. U.S.-based Japanese stock funds also saw an outflow in the week that ended Feb 3.

Though the Nikkei is up about 36 percent since Kuroda was appointed in March 2013, the yen has weakened from 95 to nearly 117 to the dollar over that period, so in dollar terms it is up only 10 percent, less than half the rise seen on the U.S. S&P 500 index.

“Real economic reform will only make a difference in the longer term. So I can only hope that Abenomics doesn’t lose momentum,” said Hannah Cunliffe, senior portfolio manager at Union Investment in Frankfurt.

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