SBM Call on the land of the rising Nikkei pays handsome dividends

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See our blogs on the Nikkei here – and here – and also our Buy in levels on the About Us page (8600 & 8850).

Very handsome profits have been returned in recent weeks from our Trading Buy Calls on Japan and we don’t expect the train to reverse any time soon, as evidenced by the posting of further gains yesterday as the market grapples with the implications of the election result. With Shinzo Abe of the LDP now in charge, he wasted no time in placing pressure on the Bank of Japan on Monday ahead of a policy meeting later this week. Abe stated that voters had overwhelmingly backed his call for aggressive monetary stimulus. He also said that once the new cabinet is formed on Dec. 26, instructions will be issued to ministers to produce a joint statement with the Bank of Japan targeting 2 percent inflation which is the double the current threshold.

The Bank of Japan has all but lost its battle to remain independent and now has no option but to adhere to Abe and begin implementation. It is likely that Abe will remove some of the Governors resistant to aggressive quantitative easing and replace them with more politically compliant members.

Abe was elected on policies that called for “unlimited” monetary easing by the BOJ and a substantial increase in public spending to break out of the fourth recession since 2000, and persistent deflation.

Time will only tell how this “grand experiment” plays out, but in the interim we believe the Nikkei is headed much higher whilst the yen continues to lose ground against all the major currencies. The first instalment is due later in the week, with the BOJ likely to boost the underlying asset-buying programme at the end of a two-day meeting on Thursday. Stay long & strong!

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