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Kuroda had been saying that he didn't think something like this would help so it is a bit surprising and it's clear the market has been surprised by it, the banking sector is getting smoked right now, though everything else seems to be doing just fine. This has obviously had a big effect on inflation and on inflation expectations.
The market was massively oversold by the end of trading yesterday, so it's no surprise that we're seeing a snap back, we've seen a state of panic recently, and now that people are coming around to the view that things aren't really all that bad investors are snapping up these oversold low price to book stocks, which are roaring today.
At the moment people are assuming that oil is a barometer of global trade and they worry that falling oil prices mean there is no demand, but all other concerns pale in significance to next week's Fed meeting. The trouble with this recent volatility is it makes it harder to work out sentiment surrounding a possible rate hike.
We've been on the lookout for growing consumption so it's really good to see such a strong number in the household survey, conditions for making money in Japan are good, it's the rest of the world that scares me. When a panic hits it's Japanese shares that get dumped because the market is so liquid compared to the rest of Asia.
Retail is reheating over the past couple of months, which is an incredible relief when the export side of the economy is looking so bad, drugstores are doing well, electronics stores are finally seeing some growth after suffering a lot following the consumption tax hike. Restaurants have also accelerated quite a bit.
U.S. private sector employment data was just strong enough to give the expectation that non-farm payrolls shouldn't be a shock in either direction, still, markets are in a state of caution because the question of how Friday's data will impact U.S. policy is on everyone's mind. Japanese policymakers are nervous because they can't do anything until it's clear what the Fed will do, which has kept investors on edge.
We had a big recovery last week but it's now reversed so people are taking profits on shares that had a good bounce, japan saw some of the biggest swings last week because it's such a liquid market, which makes it the natural place to go when there's a bit of chaos in Asia. So the last week was spent riding the wave of volatility and now people are starting to have a deeper think about what the fall in China really means for Japan.
The panic is starting to subside, so, instead of being intensely focused on China, people are starting to look more broadly at the international picture, and, the rest of the developed world seems to be chugging along reasonably well outside of some problems in commodities nations and emerging markets. North America and Europe are doing just fine and that's what really drives things as far as Japan is concerned--the shopping malls of rich nations.
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