Kuroda has no yen to ease

This is what equity markets look like when central bankers run out of bullets.

The Japanese central bank did nothing with rates and stood pat on its QE level and stocks around the world sold off hard.

The Nikkei sold off 3.6% and major Europe exchanges are down between 1% ans 2%. Dow futures are down 0.8% in pre-market.

Japan followed the Federal Reserve in jawboning the markets about future easing, but had worse results.

The yen strengthened on the lack of additional easing, which is the driver of stock plunge.

Bank of Japan chief Kuroda said afterward that he was prepared to go further down the negative interest rate road if needed.

This negative rate environment is a real-time experiment, which most economist support because there is little left for central bankers to do.

Providing cheaper and cheaper liquidity into a broken banking system has been a boon for traders using cheaper yen to buy global equities, but has done little to boost economic growth.


As I wrote on Monday, the first look at Q1 2016 GDP came in at 0.5%. This number has little to say about the US economy since it will be revised down in the following two months.

The Obama administration was looking for a “robust” headline number (this is the best you can get from this ailing economy) for Hillary Clinton to continue running on his policy.

 

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