Nikkei 225 – Disunity threatens bullish sentiment

Abenomics took a slight setback yesterday, when BOJ Minutes revealed that not all board members are on board with Shinzo Abe’s “Boldest Strongest” policies. One member expressed concerns that inflation may exceed target 2%, sending Japan into hyper-inflation mode. Those that are in favor of stronger measures have not come to a consensus on what they believe is the right way forward. Granted the meeting predates Kuroda’s appointment as Governor, but the road to Abe’s monetary stimulus may not be as smooth and straight forward as we thought it was.

Today added more complication to the BOJ issue, as opposition party Japan Restoration is reported to support Kuroda and Iwata’s nomination, but is seeking to stop Nakaso from assuming the Deputy Governor role. Whether this is a political play, to make the Japan Restoration party appear less meek, or perhaps is genuinely a concern over Nakaso’s credentials is unknown, but regardless the impact to market confidence is clear – Shinzo Abe has now experienced the 1st major obstacle to his Abenomics grand masterplan.

Hourly Chart

Market reacted predictably, trading lower from the Asian high which is at the confluence of support found earlier this week. Price is still bearish after yesterday’s BOJ’s minutes pierced below the Kumo. Stochastic reading remains heavy with an interim peak forming and readings threatening to go lower from here.

Daily Chart

Things are still cheery on the Daily Chart though, the recent fall in N225 prices is merely a blip with prices still being supported along Channel Top. Even if price break back into the Channel, overall tone remains bullish until the Channel has been invalidated towards the downside. Stoch readings here suggest that a top may be near, but readings are generally not reliable when a strong trend is underway (see Stoch readings during December).

Across the Pacific Ocean, US manufactures are starting to complain about the unfair advantage the Japanese companies have due to the weaker Yen. Toyota Motor Corp, the largest automaker is estimated saving between $1,500 – $5,700 per car due to the weaker Yen. US automakers are crying foul and we could see more complains coming in, potentially forcing the Fed and the White House to start admonishing Shinzo Abe to taper his Abenomics down.

On the other side, China’s tightening policies is affecting their stock prices and eroding sentiments in Asian equities. If this sentiment spill over to Japan, we could easily see Nikkei 225 climbing down from the recent highs.

All these put even more pressure for BOJ to deliver something big real soon before G20 start to clamp down on its case. European and American leaders have choose to ignore Japan’s monetary action for now, but with election coming soon for major countries such as Germany, expect G20 to come out soon as voters make their voices heard.

More Links:
Yen and Pound Drop as Aussie gains across the board
USD / JPY – Volatile as BOJ Governor Kuroda Talks Tough

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