Op Ed : Japanese Alarm Bells Sounding Faint

I do not remember a time when Japan was not recessionary in my entire career.

We have grown to used to their underperforming growth that we pay scant heed to any negative news coming out of the place and even less regard to any good news because it is bound to turn south again.

Analysts stopped covering Japan these days because the numbers have become impossible to fathom. For instance, I just dug out Japan’s national debt numbers and its USD 11.844 trillion. Guess what US’s national debt is ? ….. Only USD 10.89 trillion. Third place is Italy at USD 2.079 trillion and UK is fourth at USD 1.969 trillion.

Top 5 countries in terms of GDP – US  USD 15.09 trillion China USD 7.3 trillion Japan USD 5.87 trillion Germany USD 3.57 trillion France USD 2.77 trillion.

Why are alarm bells not ringing for Japan ?

Well, I think it should.

Today : Japan GDP Shrinks 0.9% in Q3, Most Since Quake.  It makes sense with all the corporate earnings recently and their bread and butter consumer electronics industry facing the threat of a death spiral. You feel washed out thinking about their aging population and stagnating economy.  You cannot even hate them without feeling compassion.

When I read common sense challenging articles and, even better, asinine trade strategies and ideas, I reel in horror. That intelligent reasoning has given way to logic defying reason. The reason of RISK ON and RISK OFF and the correlations so far.

So USDJPY is supposed to head lower on RISK OFF ? Why do they sell USDJPY on bad news out of Japan and sell USDJPY  on bad news out of US and Europe and Asia ? It is like the world’s universal punching bag.

That sounds a little desperate to me.

I have been playing the USDJPY range for the past year. It is getting tiresome which I suspect is self perpetuating as more and more people stop thinking about it and hope it will continue to drag its status quo into eternity, allowing the market to continue to use USDJPY as the convenient hedge for their EUR, AUD etc attacks.

Why do I think it will be different this time ?

Because they are running out of options. There is nothing possibly optimistic for Japan any longer and people will soon wake up to that. Everywhere else in the world, there are green shoots of growth still budding away, nipped occasionally by the frost of bad news.

The difference is that there is and can be NO GOOD NEWS out of Japan. And, as for their fiscal cliff ? At >200% Debt/GDP, they have tipped off ages ago.

Fitch: Little Scope for Near-Term Optimism on Japanese Economy

USDJPY is holding the 79.00 at the moment. Mrs Watanabes are following the hedge funds to Turkey these days.

If you ask me, I’d say better think twice about selling USDJPY. Japanese tsunamis are nothing like we have seen. They are, afterall, the 3rd largest economy in the world. And deep inside, I admire their guts.

How often do we hear of tainted foods, faulty goods, plagiarism and fraud (last being Olympus) coming out of them ? China gets all the ear bashing while Japan suffers in silence.

Trade : Long USDJPY 79.25, add every 50 ticks lower till 75.00 stop. Target 80.30, 83.00 till 93.00 end 2013.

Long SGDJPY for the medium term. SGD is heading the way of JPY and at least, the government wants it to appreciate, unlike Japan.

This tirade does not change the fact that I love Japan. I love the food, their anime, their quirky youth culture, their aged’s dedication to preserving their heritage, their pride in their produce, their national living treasures, their innovation in manufacturing that led to current mass production standards and most of all, I admire the spirit of the people who faces each new obstacle with the stoicism that the rest of the world can only admire.

Their economy is on the verge of ruin now. Their recession has spiraled into stagnation. Their debt is staggering even as hedge funds continue to pour into JGBs, reversing the funding currency concept with cheap QE money.

I say, the wake up call is nigh.

USDJPY will strike back with a Godzillian attack as the sleeping giant wakes. And, secretly, I hope it takes out the Panda squad engineering her downfall.