japanese intervention

USD/JPY – This Market "IS" USD/JPY

Forex Kong 9 Comments

Some snippets from conversation on the currency pair USD/JPY from the Members Site, as I see it as valuable information for all.

**Watch it trade along side risk here as……USD/JPY has only managed to make it “back to the top of it’s range” while the SP 500 as well Nikkei have rallied to complete a total retracement of the move lower last week.

If that’s the best USD/JPY can do….”now” with markets back near the all time highs….you’ve got to question what it’s got left in it.**

 

**USD and JPY both represent the two “base currencies” currently being printed at alarming rates.

These are considered “funding currencies” as money is borrowed on the cheap…and in turn “invested” in assets ( U.S Stocks for example ) where “yield can be found”.The comparison of the two throws many for a loop….and as a currency pair it’s a tough nut to crack without broader understanding. The last piece of this puzzle rests with JPY.

As risk comes off ( I don’t care if it’s tomorrow…but in general ) all those investments “funded” by cheap JPY bust…..and the money flows back home.

Like a tidal wave….all the “free money” suddenly comes out of “all easy assets funded by it” – and comes racing back to it’s place of origin.**

 

**Nothing can stand in the way of this as the trade is “so massive” that it’s movement overtakes / over shadows all other movements in markets. U.S Bonds are sold, U.S stocks are sold, Australian and NZD Dollars are sold….EVERYTHING funded by cheaply printed JPY is sold as the elastic band “snaps back” and JPY is repatriated back home. The BOJ has printed , devalued , intervened MANY times before this ( although not on such a desperate scale ) and every single time…..I’m talking EVERY SINGLE TIME – the same result.

It doesn’t work….it won’t work this time.

Only thing is…..with such desperation – it’s already gone on far longer than one would imagine…..hence.

The disaster / BANG we’ll eventually see when she “once again”….does what she always does.**

 

**USD/JPY “IS” the market ( as per my entire trading thesis since you’ve followed ).

Seeing it “top out” back in January “WAS” the top of the market and this entire summer has merely been “retail distribution” as the big boys ( and myself of course ) plot our way towards the next “real move”. Watching USD/JPY fall thru 101.20 will mark ” the beginning of the end ” in global risk…..as ALL THINGS will follow suit.

A valuable observation / consideration for one to take forward.**

Obviously much more info available in at the members site, should you be so inclined to “broaden your horizons”.

Fukushima Exposed – Tuna With Two Heads

Forex Kong Got something to say?

After years of obfuscation and, simply put, lies; TEPCO has admitted in a new report that more nuclear fuel had melted at the Fukushima nuclear reactor than previously stated. While this is dreadful news, it gets worse, as the report further confirms that despite Abe’s promises and TEPCO’s state-funded efforts to build ice-walls, it may miss an important deadline binding it to clean radioactive water stored inside the Fukushima nuclear plant.

Bloomberg reports officials commenting “we are doing everything we can do,” but it appears, that is not enough as tens of thousands of tons of toxic water are expected to remain at the site by the imposed deadline.

Get the rest of the story here or “oh I dunno” maybe start looking ito the “reality of this disaster” yourself.

You still haven’t got short Japan? EWJ ( as suggested a couple days ago ) clearly moving lower.

More here.

A Question? – For Fellow Forex Traders

Forex Kong 10 Comments

You are all hotshots – I know.

So…..tell me.

As many of you have suggested “trading the fundamentals” is akin to “reading the entrails of dead animals” ( essentially suggesting that “pure technical analysis” is sufficient ) – what are your thoughts on USD/JPY?

JPY ( Japanese Yen ) being the largest contributing factor in the current and seemingly “never ending rally in risk” ( as Japan’s “printing machine” currently dwarfs that of The United States ) – why isn’t USD/JPY making “massive upside moves” along side the ridiculously manipulated run up in U.S Equities?

If currency markets where “taking the bait” wouldn’t we see USD/JPY bursting higher, then higher, and even higher alongside the current ponzi playing out in U.S Equities?

USD_JPY_July_23_2014

USD_JPY_July_23_2014

From a purely technical perspective the chart pattern seen above ( a descending triangle ) is extremely bearish – suggesting that the pair will “eventually break through support” and likely waterfall lower.

The Central Banks of both Japan and The Unites States are hell bent on preventing this from happening but…..would you imagine the opposite?

Risk at all time highs…but the “ultimate suggestion” of risk ( borrowing JPY at 0% and investing it in U.S Equities” in seeking yield ) hasn’t done jack shit for the past 6 months.

I invite you all to weigh in – as fellow readers can only benefit from the potencial “pissing match ” to ensue.

Perhaps a cat’s got your toungue? Or maybe you’re out in the back yard now…looking to kill one and have a good look at it’s insides – with hopes of figuring this out.

Good luck with that.

 

Bearish On Japan – EWJ As A Play

Forex Kong 12 Comments

Looking at the Nikkei “pump job” this morning, as well JPY getting hammered,coupled with the sales tax implementation and latest string of “terrible data” out of Japan I’m about as bearish on Japan as one could be.

It doesn’t look like Japan is going to be able to do much more “stimulus wise” until maybe even July.

Get this……the government is also now telling residents previously living a short 20 km from the Fukushima Plant that it’s SAFE to go back home. SAFE?!

Unreal.

For those into stocks one could consider short plays on “EWJ” or even a couple ( tiny tiny! ) longer dated put options “short” late tomorrow or even mid-week.

As for us currency guys..the Japanese Yen continues to wallow, as the BOJ continues to do all it can to keep this boat afloat. I’m still waiting for a more substancial signal / move before trying “yet again” to get long JPY ( short of a few trades already initiated ).

Look for continued news / headlines and likely larger moves DOWN in the Nikkei Japanese Stock Market up around 15,000.

 

The Japanese Yen Death Spiral Continues

The Bank of Japan has painted itself into a corner with nowhere left to turn. Every policy tool in their arsenal has been deployed, abused, and rendered ineffective. The yield curve control mechanism is cracking under pressure, and the yen continues its relentless slide into oblivion. This isn’t just monetary policy failure—it’s economic suicide wrapped in bureaucratic double-speak.

What we’re witnessing is the slow-motion collapse of a currency that once commanded respect on the global stage. The BOJ’s desperate attempts to stimulate growth through endless money printing have created a zombie economy propped up by artificial life support. When central bankers start telling displaced nuclear disaster victims it’s “safe” to return home, you know desperation has reached new heights.

The Nikkei Pump Charade

This morning’s Nikkei rally is nothing more than lipstick on a pig. The Japanese stock market has become a casino where the house always wins—until it doesn’t. These manufactured pumps are designed to create the illusion of economic vitality while the underlying fundamentals continue to rot. Smart money isn’t buying this performance; they’re positioning for the inevitable crash.

The 15,000 level on the Nikkei represents a critical resistance point where reality meets fantasy. Every push higher becomes more artificial, more desperate, and ultimately more unsustainable. The sales tax implementation has created a consumption cliff that no amount of stock market manipulation can overcome.

Currency Debasement Strategy Backfires

The BOJ’s currency debasement strategy was supposed to boost exports and reinflate the economy. Instead, it’s created import inflation that’s crushing Japanese consumers while doing little to stimulate genuine economic growth. The yen’s weakness isn’t a sign of competitive advantage—it’s a symptom of systemic economic decay.

This is where the USD weakness narrative becomes interesting. While the dollar faces its own structural challenges, the yen’s problems run far deeper. We’re looking at a race to the bottom where the yen might actually win by losing the most.

Trading the Breakdown

The technical setup for shorting Japanese assets couldn’t be clearer. The EWJ presents an excellent vehicle for those looking to profit from Japan’s economic mismanagement without dealing with currency conversion complexities. Put options on the Nikkei offer leveraged exposure to what appears to be an inevitable correction.

For currency traders, the waiting game continues. The yen has been so oversold for so long that any meaningful bounce will likely be met with fresh selling pressure. The key is patience—waiting for that substancial signal that confirms the next major move rather than getting chopped up in the noise.

The Bigger Picture

Japan’s situation represents a cautionary tale for other developed economies flirting with similar monetary extremes. When you’ve exhausted conventional policy tools and moved into experimental territory, the exit strategy becomes increasingly complex and potentially catastrophic.

The Fukushima situation adds another layer of surreal desperation to the mix. When governments start rewriting radiation safety standards to fit their narrative, you know the situation has moved beyond normal economic policy failure into something far more sinister.

This isn’t just about one currency or one stock market—it’s about the endgame of modern monetary policy taken to its logical extreme. Japan is the canary in the coal mine for what happens when central banks lose control of the narrative and reality starts asserting itself.

The market rally elsewhere might provide temporary cover, but Japan’s structural problems can’t be papered over indefinitely. The reckoning is coming, and when it arrives, it’s going to be spectacular in its brutality.

Why Isn't Fukushima Front Page News?

Forex Kong 9 Comments

I’ve learned everything, I’ve read everything – but I still haven’t “heard” anything!

What the hell is going on? I mean seriously!

We’ve got the Golden Globes front and center on a typical Sunday night here in the West, while a population of 13 Million people in Tokyo sit quietly unaware of the looming disaster only 150 miles away!

150 miles! Can you even imagine! A nuclear accident / disaster that makes Chernobyl look like a beach BBQ, and you’ve got an entire population ( not to mention an entire planet now that Japan has passed the laws “forbidding reporting” on the incident ) sitting in the dark!

Obama and the boys in Britain, France, Canada have sent millions in aid and stepped right up to help  tiny African countries work thru civil “disputes” ( not taking anything away from the horrors there in ) as well helped any number of countries through “national disasters” at the drop of a hat!!

How the hell can the entire world continue to turn a blind eye to what’s really going on in Japan?

It’s like sitting at home in Seattle, and the nuke site is in Vancouver – that close ( with winds blowing at a modest 6 km/h)…..and you’re not making plans to move????

Unreal…..we’ve seen more coverage of a “f$&kin cat stuck down a storm drain” than that of the largest industrial disaster known to mankind, let alone the largest impending threat to our human existence! Where are the news helicopters? Where’s the “minute to minute coverage” of the attempted removal of fuel rods etc?? Where’s the “evacuation plan” when ALL OF JAPAN needs to get off the rock?

How can this not be considered a “global event”? And immediately take the attention of the planets top ranking / thinking / experts in the field to “get their asses over there” and get this thing figured out!

I can’t believe that I will actually have to cross off one of the most highly anticipated travel / food / cultural adventures of my “proposed” future now knowing what I know.

I will never get to sit at “Nobu” in Tokyo and stuff my self to the gills with the finest sushi on the planet, and worse yet – I won’t be able to take anyone to enjoy it with me.

Japan now  – “officially” off limits.

Unreal. I am beyond sad.

 

The JPY Collapse: What This Nuclear Disaster Really Means for Currency Markets

While the world pretends everything’s fine, the Japanese Yen is screaming the truth that nobody wants to hear. This isn’t just about radiation levels or fuel rods – this is about the systematic destruction of one of the world’s major reserve currencies. When a nation faces an existential threat of this magnitude, their currency becomes worthless paper, and smart money knows it.

The Yen Death Spiral Nobody’s Talking About

Look at the charts. The JPY has been in free fall, and this disaster is the final nail in the coffin. You think the Bank of Japan can prop up their currency when they might need to evacuate their entire population? Every central banker on the planet knows what’s coming, but they’re all playing pretend because admitting the truth would cause immediate global financial panic.

The carry trade that made JPY the funding currency for decades is about to reverse with violent force. When leveraged positions start unwinding because traders realize Japan might become uninhabitable, we’re talking about trillions of dollars scrambling for exits simultaneously. This isn’t a typical currency crisis – this is currency extinction.

Safe Haven Flows: Where the Real Money Goes

While mainstream media focuses on celebrity award shows, institutional money is quietly repositioning for the inevitable. dollar weakness becomes irrelevant when you’re looking at total currency collapse. The smart money isn’t debating whether to buy USD or EUR – they’re buying hard assets and getting as far away from anything denominated in Yen as possible.

Swiss Franc, Canadian Dollar, Australian Dollar – these become the new safe havens when one of the major currencies faces existential threat. But here’s the kicker: most retail traders are still analyzing JPY pairs like this is some normal correction. They’re drawing support and resistance lines while the entire foundation of the Japanese economy potentially crumbles.

The Global Currency Reset Nobody Sees Coming

This disaster accelerates everything. When Japan, the world’s third-largest economy, faces potential evacuation, it forces a complete reshuffling of global currency relationships. China’s watching this closely – they know opportunity when they see it. The Yuan positioning to fill the void left by a collapsed Yen isn’t coincidence.

Every major central bank has contingency plans for exactly this scenario, but they won’t implement them until the last possible moment. Why? Because executing those plans admits that one of their peer currencies is finished. The political and economic implications are too massive to acknowledge until absolutely forced.

Trading the Unthinkable

Here’s what the professionals already know: you don’t trade against existential threats. When a currency faces potential elimination due to national disaster, technical analysis becomes meaningless. Strategic positioning means recognizing that normal market relationships break down completely.

The JPY pairs aren’t exhibiting normal volatility patterns because this isn’t a normal situation. Every bounce is a selling opportunity, every attempt at support is temporary life support for a dying currency. Professional money managers are quietly rotating out of any JPY exposure, not because of technical levels or economic data, but because they understand what uninhabitable means for currency viability.

While Tokyo sits unaware just 150 miles from potential catastrophe, currency markets are already pricing in scenarios that most people can’t even imagine. The Yen isn’t just weak – it’s facing extinction. And when currencies die, they don’t send advance warning. They just disappear from relevance, leaving everyone holding them with worthless paper and the bitter realization that they ignored the obvious signs.

This is bigger than Forex. This is about recognizing when fundamental assumptions about major currencies no longer apply. Japan taught the world about currency strength and precision. Now it’s teaching us about currency mortality.

No Taper – Never – More QE To Come

Forex Kong 61 Comments

There is no possible way that the Fed is going to taper, and I find it to be completely irresponsible that the current “media blitz” in the U.S media is speaking of it  – as if it’s practically a given!

This is absolutely outrageous!

A bunch of floating heads reading a teleprompter, speaking as if they’ve some “authority” on the subject, rambling on and on and on,as to how the Fed’s “taper” is not “tightening”.

And you’re buying this bullshit?! Do you even understand the difference? Is there a difference?

It’s like this…..I can find a million different angles to illustrate the point, but in sticking with the “Japan is doomed theme” lets simply consider this.If the U.S Federal Reserve was to actually “taper” we all know the inverse / correlating effect it will have on interest rates. THERE IS NO WAY THE FED TAPERS WITHOUT INTEREST RATES RISING. PERIOD.

Interest rates rising in the U.S will put immediate ( and I mean “immmmmmediate” ) pressure on interest rates around the globe.

Boom!….Japan’s interest rate on outstanding debt rises to only 2% and BAM!

Full scale economic collapse / disaster / as the interest owed would exceed 80% of the government revenue, setting of a string of “economic events” tumbling domino after domino in this now “very global economy” we live in.

There is not a single chance in hell! The Fed is going to risk “global economic meltdown” by way of tapering, and “forcing rates higher” at a time when the entire planet is hanging by a thread.

Impossible.

This thing is so interconnected now that as we’ve discussed in the past – The U.S Fed has painted itself so far into the corner, that the only way to keep the dream alive will be to “increase QE”.

I honestly don’t know how the entire staff of CNBC as well CNN go home every night to their families etc – and are able to look themselves in the mirror with any shred of dignity, moral code or sense of decency.

It’s disgusting.

The Forex Reality Check: What This Means for Currency Markets

Dollar Strength is Built on Quicksand

Let me spell this out for you in terms that actually matter to your trading account. All this taper talk has created a false narrative around USD strength that’s about as solid as a house of cards in a hurricane. The Dollar Index rallying on taper speculation? Pure fantasy! You’re watching algorithmic trading systems and retail sheep chase headlines while the smart money knows exactly what’s coming next. When reality hits and the Fed either maintains current QE levels or – as I fully expect – increases them, that USD strength evaporates faster than morning mist. We’re talking about a systematic debasement of the world’s reserve currency that makes the Plaza Accord look like child’s play.

Here’s what the talking heads won’t tell you: every single dollar that gets printed makes your existing dollars worth less. Mathematics doesn’t lie, even when financial media does. The Fed has created over $4 trillion out of thin air since 2008, and they’re nowhere near done. Japan’s playbook of endless money printing is now America’s reality, and the forex markets are going to reflect this whether Wall Street likes it or not.

The Yen Carry Trade Apocalypse

Now let’s talk about the elephant in the room that nobody wants to acknowledge – the unwinding of the biggest carry trade in financial history. For years, traders have borrowed yen at near-zero rates to buy higher-yielding assets denominated in dollars, euros, and every other currency under the sun. This massive trade has artificially suppressed the yen and inflated asset bubbles globally. But here’s the kicker: if U.S. rates were to actually rise from taper talk becoming reality, this entire structure collapses in spectacular fashion.

We’re not talking about a gentle unwinding here. We’re talking about a violent snapback that would send USD/JPY crashing through support levels that haven’t been tested in decades. The Bank of Japan knows this, the Fed knows this, and every central banker worth their salt knows this. They’re all trapped in the same monetary prison they built for themselves, and the only key is more stimulus, not less.

European Chaos Multiplies the Madness

Don’t think for one second that Europe is sitting this party out. The European Central Bank is watching this taper theater with absolute horror, knowing that any meaningful rise in U.S. rates would expose the fundamental weakness of their own banking system. Italian and Spanish bond yields would explode higher, making their debt loads completely unsustainable within weeks, not months. The EUR/USD would face pressure from both sides – a collapsing European economy and a temporarily stronger but ultimately doomed dollar.

Mario Draghi’s “whatever it takes” promise looks increasingly hollow when you realize that “whatever it takes” is exactly what the Fed is about to be forced into doing on an even larger scale. The competition to debase currencies isn’t ending – it’s about to enter its most aggressive phase yet. Every major central bank will be forced to match or exceed Fed stimulus just to keep their economies from imploding.

The Real Trade Setup

So where does this leave us as forex traders who actually want to make money instead of listening to media fairy tales? Simple. Position yourself for the inevitable reality: more money printing, not less. The commodity currencies – AUD, CAD, NZD – are going to absolutely scream higher when this taper nonsense gets exposed for the lie it is. These currencies benefit directly from the inflation and asset bubble expansion that increased QE creates.

Gold is about to have its moment too, and by extension, any currency tied to real assets rather than empty promises. The Swiss franc, despite SNB intervention, will find renewed strength as European chaos unfolds. Even the British pound, for all its own problems, looks attractive compared to the systematic destruction of purchasing power happening in dollar and euro denominated assets.

Stop listening to the noise and start following the money flows that actually matter. This taper talk is the biggest head fake in modern financial history, and positioning for the opposite outcome isn’t just smart trading – it’s the only logical response to the mathematics of our current monetary system.

Japan's Aging Population – Adult Diaper Sales Surge

Forex Kong 12 Comments

Not like Fukushima isn’t a large enough problem for Japan ( and the rest of the world for that matter ) but unfortunately……..it’s only a “near term concern”.

Originally triggered by a “massive baby boom” post World War II, the demographics of Japan have evolved into something pretty unusual. The combination of long life expectancy and extremely low birth rate (one of  the lowest of all developed nations ) has resulted in a rapidly aging population, such that currently “one in every four citizens” is over the age of 65.

According to Japan’s National Institute of Population and Social Security Research, it will be “one in three people” in Japan to be aged above 65 by the year 2030.

There will be more people “over the age of 60” than “under the age of 14” by 2020, with more diapers being sold for adults than for babies.

Japan’s rapidly aging population and low investment returns are driving a decline in savings and wealth ( as retirees now “spend” their savings as opposed to grow them ) dramatically reducing the amount of capital available to fuel the economy.

Since 1981 Japan has produced enough savings to finance its domestic investment needs “and” still export savings as well. But as Japan grows older and it’s savings pool shrinks they will surely become a “net borrower” – meaning…..yet another “purchaser of U.S Debt” will likely stop buying and put even “more pressure” on the economic situation in the U.S.

“You ain’t investing in no U.S Treasury Bonds when your primary concern is maintaining a reasonable quality of life in your later years.”

Is it any wonder we see Japan taking such drastic steps ( via currency debasement / QE etc..) to promote growth and bolster their economy?

A work force that is generally “drying up” ……………and taking their life savings along with them.

The Currency War Reality: When Demographics Drive Monetary Policy

USD/JPY and the Inevitable Breaking Point

Here’s what every trader needs to understand about this demographic disaster: it’s creating a currency war scenario that makes the Plaza Accord look like child’s play. The Bank of Japan isn’t just printing money for kicks—they’re fighting an existential battle against deflationary forces that would make the 1930s look tame. When your population is literally shrinking and aging simultaneously, traditional monetary policy becomes about as useful as a chocolate teapot. The USD/JPY pair has become ground zero for this battle, with the BoJ effectively telling the world they’ll debase the yen into oblivion before they let deflation win. Smart money knows this isn’t sustainable, but “unsustainable” can run a lot longer than most traders’ account balances.

The real kicker? Every time the yen weakens significantly, it forces other Asian central banks into defensive positions. Korea, Taiwan, and even China can’t afford to let Japan gain too much export competitiveness through currency manipulation. This creates a domino effect of competitive devaluations that ultimately strengthens the dollar—not because the U.S. economy is necessarily stronger, but because everyone else is racing to the bottom faster.

The Great Repatriation Myth

Wall Street loves to talk about Japanese repatriation flows, but here’s the ugly truth: those flows are about to reverse permanently. For decades, Japanese institutional investors—pension funds, insurance companies, banks—have been massive buyers of foreign assets, particularly U.S. Treasuries and European bonds. This capital outflow helped suppress the yen and supported global bond markets. But demographics don’t lie. When you’ve got a shrinking workforce supporting an exploding retiree population, those overseas investments get liquidated to pay for healthcare and pensions at home.

This isn’t some temporary cyclical shift—it’s a structural breakdown that will persist for decades. Japanese life insurance companies, sitting on trillions of yen in assets, will be forced to repatriate foreign holdings to meet domestic obligations. The result? Sustained yen strength pressure that conflicts directly with the BoJ’s debasement strategy. It’s an unstoppable force meeting an immovable object, and the forex markets will be the battleground.

Cross-Currency Implications: Beyond the Obvious

While everyone’s watching USD/JPY, the real action is happening in the crosses. EUR/JPY and GBP/JPY are becoming proxy trades for global risk sentiment, but with a demographic twist that most traders miss completely. European demographics aren’t much better than Japan’s—they’re just about 10-15 years behind on the timeline. Germany’s birth rate is actually lower than Japan’s, and Italy’s population is already shrinking. This means EUR/JPY isn’t just a risk-on/risk-off play anymore; it’s a battle between two currency blocs facing similar demographic disasters at different stages.

The commodity currencies—AUD/JPY, NZD/JPY, CAD/JPY—represent the other side of this trade. Countries with more favorable demographics and resource wealth will increasingly benefit from Japanese capital seeking higher returns and inflation hedges. But here’s the catch: when Japan’s repatriation flows really kick into high gear, even these traditionally strong crosses could face headwinds.

The Endgame: What This Means for Global Markets

Japan’s demographic crisis isn’t happening in a vacuum—it’s the canary in the coal mine for developed economies worldwide. The U.S., Europe, and even China are facing similar challenges, just on different timelines. This creates a global environment where central banks are forced into increasingly desperate measures to maintain economic growth with shrinking workforces and ballooning entitlement costs.

For forex traders, this means we’re entering an era where traditional correlations break down. Interest rate differentials matter less when every central bank is trapped by demographic realities. Carry trades become more dangerous when the funding currencies are backed by countries facing existential population crises. The safe-haven status of currencies like the yen and Swiss franc becomes questionable when those countries face long-term structural decline.

Bottom line: Japan’s demographic time bomb isn’t just a Japanese problem—it’s a preview of the global monetary chaos coming to every developed economy. The only question is timing, and in forex markets, being early is the same as being wrong. But being unprepared for this demographic-driven currency realignment? That’s just being stupid.

Japan's Woes – Fukushima, China , Debt And Seniors

Forex Kong 20 Comments

For the coming week, I’m going to be writing / providing considerable information on some of the very troubling developments taking place in Japan. As you already know, I watch Japan very closely ( much more so than the U.S) and am “compelled” to share with you some of the things I’ve recently come to understand.

1. Fukushima

With over 300 tonnes of contaminated radio-active water flooding back into the pacific ocean “daily” for the past 2 FULL YEARS – the nuclear disaster in Japan is the absolute #1 largest threat to humanity I will have seen ( and likely yourselves ) in our lifetimes. The current situation is so dire, that Abe and the Japanese government have now passed a “new bill” granting Japan’s govt sweeping powers to declare state secrets where in whistleblowers and journalist may face up to ten years in jail for exposing anything the Japanese government declares “a special secret.”

If you can imagine how frail the situation is – if a single “spent fuel rod assembly ” of the 1000’s hanging precariously in reactor 4 where to break in open air – 30 million citizens of Tokyo may face evacuation, crippling the world’s third largest economic centre, paving the way for complete global economic  disaster.

As little coverage as the story is getting in the West, the threat at Fukushima is very, very real and will take many, many years to even “contain” – let alone repair. All the while…the contamination continues with estimates of impacting the entire Pacific Ocean over the next 5 years.

http://www.zerohedge.com/news/2013-12-06/japan-secures-final-passage-secrecy-bill-designed-kafka-inspired-hitler

This is an excellent breakdown of the situation moving forward, should any of you care:

http://www.geoengineeringwatch.org/fukushima-facts-that-you-have-not-been-told-about-dire-update/

Given the “passing” of this new bill, I fear it’s unlikely we will really “ever” get the information needed to properly evaluate the situation at Fukushima, as it’s obvious the Japanese don’t want to speak of it. Tourism, exports, health care, government reputation etc…take your pick – the lasting effects on Japan ( and it’s economy ) will be felt for many years to come.

Throughout the week I want to also touch on China’s recent military actions concerning Japan, as well the country’s “mushroom cloud” of debt and rapidly aging population.

The Domino Effect: How Japan’s Crisis Reshapes Global Currency Markets

JPY Weakness and the Safe Haven Paradox

The irony facing forex traders right now is profound. Japan, traditionally viewed as a safe haven currency, is sitting on what amounts to a financial and environmental time bomb. The yen’s role as a funding currency in carry trades has masked the underlying structural weakness, but make no mistake – the fundamentals are deteriorating rapidly. With the Fukushima situation draining billions from government coffers annually, and the new secrecy laws preventing transparent reporting of costs, the JPY is living on borrowed time. Smart money is already positioning for prolonged weakness against major pairs, particularly USD/JPY and EUR/JPY. The Bank of Japan’s money printing operations, ostensibly for economic stimulus, are increasingly being used to fund disaster management and containment efforts that show no signs of ending. This creates a perfect storm for yen debasement that could last decades, not years.

Commodity Currency Implications and Pacific Trade Routes

The contamination of Pacific fishing grounds and agricultural exports from Japan creates massive opportunities in commodity currencies. Australia and New Zealand, as major food exporters to Asia, stand to benefit enormously from Japan’s declining export capacity. The AUD/JPY and NZD/JPY crosses are particularly attractive for long-term positioning. Canadian agricultural exports and seafood will also see increased demand as Japan’s own production becomes increasingly questionable. What’s more telling is that major shipping routes across the Pacific are already being altered to avoid contaminated waters, increasing costs for Japanese importers and making their goods less competitive globally. This shipping disruption alone justifies bearish positioning on JPY across the board. The knock-on effects will ripple through Asian trade relationships, potentially strengthening currencies of countries that can fill Japan’s traditional export roles.

China’s Military Posturing and Regional Currency Instability

China’s recent establishment of an Air Defense Identification Zone over disputed territories isn’t just military posturing – it’s economic warfare with direct currency implications. Beijing understands that a weakened, distracted Japan focused on internal crisis management cannot effectively challenge Chinese regional dominance. This military pressure compounds Japan’s existing problems, forcing additional defense spending at a time when resources are already stretched thin managing Fukushima. The yuan is being positioned as the dominant Asian currency while the yen faces this multi-front assault. Chinese manufacturing is already capturing market share from Japanese competitors, particularly in electronics and automotive sectors where “Made in Japan” is losing its premium status due to contamination concerns. Currency traders should watch for coordinated selling pressure on JPY whenever China escalates territorial disputes, as it forces Japan to divert resources from economic recovery to military preparedness.

Debt Monetization and the Demographics Death Spiral

Japan’s debt-to-GDP ratio was already unsustainable before Fukushima, but the ongoing crisis has accelerated the timeline to crisis. With an aging population requiring increased healthcare spending – particularly for radiation-related illnesses that won’t be officially acknowledged – and a shrinking workforce, Japan faces a demographic collapse coinciding with environmental disaster. The government’s only option is aggressive debt monetization, which means systematic yen devaluation is not just likely but inevitable. This isn’t temporary stimulus – this is permanent currency debasement to manage an unmanageable situation. The implications for carry trades are enormous, as the yen will remain artificially cheap for funding purposes while other central banks begin tightening cycles. Long-term forex positioning should assume the yen will lose significant value against all major currencies over the next decade. The demographic math alone justifies this view, but when combined with ongoing disaster costs and military pressures from China, the yen’s decline becomes not just probable but mathematically certain. Traders focusing on shorter timeframes miss the bigger picture – this is a generational trade setup against the Japanese yen.

The Correction – One Way To Trade It

Forex Kong 2 Comments

It’s simple.

The hot money out of Japan has been responsible for “a pile” of the recent run up in U.S equities, as Ben and his buddies have been busy enough in the bond market – with little success. TLT is currently priced at 102.65!

I’m pulling up this ol chart from back “I don’t know when” I first suggested what was to come for U.S bonds, the U.S dollar – and inevitably U.S stocks.

Quote: “Not much else to add here as the intermarket analysis above pretty much outlines the direction for the U.S Dollar. I feel we will likely see a time very soon, when U.S bonds, U.S stocks as well as the U.S Dollar all fall together.”

TLT_Forex_Kong_April_20

TLT in Weekly Downtrend

I really don’t think people grasp how screwed the Fed is, and unfortunately how this translates to the “middle class” of America – who will be stuck paying for it.

With 85 billion per month in effort, you can see by only a couple of “down days in the market” the Fed is absolutely powerless when the “market decides” what’s what.

You’d seriously have to ask your self what on Earth would need to occur to “reinstill confidence” in the purchase of U.S bonds/debt? Not to mention the “global move” away from USD. Tapering is impossible. QE will be doubled no question, then likely tripled.

Did I mention that recent data has just had the “Yuan” replace the Euro as the second most widely traded currency on the planet?

This may not be the “last of it” as the large majority of retail investors will view this “next dip” as an excellent place to buy….and they will be right – for a couple weeks.

You want to play the correction?

Get short Japan.

The Yen Carry Trade Unwind: What’s Coming Next

USD/JPY: The Mother of All Reversals

Look, when I’m talking about getting short Japan, I’m not talking about some casual swing trade here. The USD/JPY pair has been the backbone of this entire charade, and it’s about to get ugly fast. We’ve seen this monster climb from 80 to over 100, fueling massive carry trades that have pumped liquidity into everything from emerging market bonds to Silicon Valley tech stocks. But here’s the kicker – the Bank of Japan’s infinity QE program is starting to show cracks, and when this thing reverses, it’s going to make 2008 look like a warm-up act.

The fundamentals are screaming reversal. Japan’s current account surplus is shrinking faster than Ben Bernanke’s credibility, and their energy imports are killing them. Meanwhile, every hedge fund and their grandmother is loaded to the gills with yen shorts. When the covering starts – and it will – USD/JPY is going to crater so hard it’ll leave skid marks on the charts. We’re talking about a potential 15-20% move in a matter of weeks, not months.

The Real Driver: Cross-Currency Volatility

Here’s what the mainstream financial media isn’t telling you – it’s not just about USD/JPY. The real carnage is happening in the crosses, particularly EUR/JPY and GBP/JPY. These pairs have been absolute rocket ships, but they’re built on the shakiest foundation imaginable. European banks have been borrowing yen at practically zero percent and buying everything from Spanish bonds to German equities. When this unwinds, the European Central Bank is going to be caught with their pants down.

AUD/JPY is another disaster waiting to happen. Australia’s commodity boom is over, China’s slowing down, and the Aussie dollar has been living on borrowed time. The only thing keeping it afloat has been Japanese investors chasing yield in Australian government bonds. When the yen strengthens and Japanese money heads home, the Aussie is going to get slaughtered. We could see AUD/JPY drop from current levels around 95 back to 75 or lower.

Yuan Ascendancy: The Real Game Changer

That Yuan statistic I mentioned isn’t just some footnote in a central bank report – it’s the death knell for dollar hegemony. China’s been playing chess while everyone else is playing checkers. They’ve systematically built bilateral trade agreements that bypass the dollar entirely, and now they’re reaping the rewards. The PBOC doesn’t need to announce some dramatic policy shift; they’re just quietly allowing market forces to do their work.

USD/CNY has been remarkably stable, but that’s about to change. China’s ready to let their currency strengthen significantly, and when they do, it’s going to create a vacuum that sucks capital out of every other market. Think about it – why would you hold dollars earning nothing when you can get yuan exposure with a currency that’s appreciating against everything else? The smart money is already positioning for this shift. By the time it hits CNBC, it’ll be too late.

The Fed’s Impossible Position

Bernanke and company have painted themselves into a corner that would make Houdini nervous. They can’t taper because the economy is still a zombie, but they can’t keep printing because it’s destroying the currency and creating bubbles everywhere. The bond market is essentially giving them the finger, with the 10-year yield climbing despite $85 billion in monthly purchases. That’s not a market – that’s a rebellion.

When TLT breaks below 100 – and it will – that’s your signal that the game has fundamentally changed. We’re not talking about some minor correction in the bond market; we’re talking about a complete loss of confidence in U.S. fiscal policy. Foreign central banks are already reducing their Treasury purchases, and when the private sector follows suit, yields are going to spike so fast it’ll make your head spin.

The endgame here is simple: massive QE expansion that destroys the dollar’s purchasing power, or QE cessation that crashes the equity markets. Either way, the middle class gets crushed, and anyone holding dollars is going to learn a very expensive lesson about monetary debasement. Position accordingly.

Eyes On Japan – Start Following Nikkei

Forex Kong 21 Comments

It’s 11:07 a.m in Tokyo Japan right now, and traders are just getting settled in for the long week ahead.

Considering our “global market” as well the fact that Japan’s current QE program is 3X larger that of the United States – it goes without saying that I’m very interested in activity overseas. A quick look at Asian markets on Sunday night is a virtual “look into the future”, as equally skilled and experienced traders/investors evaluate the weekend’s data and start making their moves.

A current chart of the Nikkei ( I use futures /NKD ), compared to a chart of the SP 500 has both poking around at near term highs so….in that sense ( if you don’t choose to follow the Nikkei specifically ) you can imagine traders in Japan in nearly the “exact same position” as those on Wall Street.

Two separate governments, both with similar monetary policies, printing like mad with hopes they will “somehow” survive. Massive trading floors, big banks flooded with liquidity and a stock market “turned up to 11”.

In the simplest “minute to minute” sense I could easily bet you 1000 pesos that as the Nikkei trades lower, you can look forward to a lower open in the U.S. Half the planet is already “up and running” devouring the news of the day ( perhaps U.S retail sales over the holiday weekend?? ) so…..what? Did you have some idea that U.S markets lead?

With a current QE program “dwarfing” that of the U.S I can assure you – in the current environment of “free money” and “print to eternity” Japan is the country to keep your eye on.

All those freshly printed Yen had to have gone somewhere right?

You don’t think the Japanese are smart enough to “jump onboard” the “bubble fest” currently playing out in U.S equities as well?

Please…….with a full 12 hour head start, I’ll see “trouble on the horizon” in Japan long before you’ve hit the snooze button.

 

Reading the Global Currency Tea Leaves: Why JPY Movements Matter More Than You Think

The Yen Carry Trade Unwind Signal

Here’s what most retail traders completely miss while they’re glued to their EUR/USD charts – the Japanese Yen isn’t just another currency in this rigged casino we call forex. When the Bank of Japan fires up those printing presses at triple the pace of the Fed, every single freshly minted Yen becomes ammunition in the largest carry trade the world has ever seen. Smart money borrows Yen at near-zero rates and parks it in higher-yielding assets across the globe. But here’s the kicker – when risk appetite starts to sour, that carry trade unwinds faster than you can say “margin call.” Watch USD/JPY like a hawk. When it starts breaking key support levels during Asian hours, you’re getting a front-row seat to global risk-off sentiment before New York traders have even had their morning coffee. The correlation between Nikkei weakness and Yen strength isn’t coincidence – it’s mathematical certainty in a world where liquidity flows follow the path of least resistance.

Cross-Currency Surveillance: Your Early Warning System

While American traders are still dreaming about their weekend barbecues, I’m watching AUD/JPY, NZD/JPY, and CAD/JPY like they’re nuclear reactor gauges. These cross pairs don’t lie – they’re pure risk sentiment distilled into price action. When commodity currencies start getting hammered against the Yen in early Asian trading, you’re witnessing real-time capital flight from risk assets. The beauty of monitoring these crosses is that they strip away the noise of individual central bank policy divergence and give you raw, unfiltered global risk appetite. AUD/JPY breaking below key technical levels at 2 AM EST? Start planning your SPY short position because Wall Street is about to get blindsided. The algorithmic trading systems running the show these days are globally synchronized – they’re not waiting for some CNBC talking head to explain what happened hours earlier in Tokyo.

The Central Bank Coordination Myth

Don’t fall for the fairy tale that central banks operate in isolation. Kuroda’s printing press doesn’t exist in a vacuum separate from Powell’s policy decisions. When the Bank of Japan expands their balance sheet at warp speed, they’re essentially forcing every other major central bank to play defense or watch their currencies appreciate to economically destructive levels. The result? A coordinated race to the bottom that makes individual currency analysis almost obsolete. What matters now is relative debasement speed and which central bank blinks first. The Swiss National Bank learned this lesson the hard way in 2015 when they abandoned their EUR/CHF peg – currency pegs only work until they spectacularly don’t. Japan’s massive QE program isn’t just domestic monetary policy; it’s economic warfare disguised as stimulus, and the casualties are measured in currency volatility that can make or break your trading account in hours, not days.

Positioning for the Inevitable Reversal

Every experienced trader knows that trees don’t grow to the sky, and neither do artificially suppressed currency values. The Yen’s systematic weakening through money printing has created the mother of all mean reversion setups, but timing that reversal is where fortunes are made and lost. Here’s your roadmap: monitor Japanese government bond yields obsessively. When 10-year JGB yields start creeping higher despite BOJ intervention, you’re witnessing the bond market’s vote of no confidence in unlimited QE sustainability. The moment the BOJ loses control of their yield curve control policy, USD/JPY could collapse faster than the Nikkei did in 1990. Smart positioning means building modest long JPY positions on major technical breaks while the majority of traders are still betting on infinite money printing. The currency markets have a brutal sense of humor – they’ll keep everyone comfortable with the status quo right up until the moment they don’t. When that shift happens, having Tokyo market insight isn’t just an advantage – it’s survival insurance in a globally interconnected financial system where twelve hours can feel like twelve years.