Japanese domestic currency increased while the stock market plunged Japan this week showed the bracket fragility of the stock market originate from the economic stimulus program of Prime Minister Shinzo Abe.
Main reason the yen hits day 112 JPY 1 USD exchange Thursday, 2.11 - 8.5% shortly after the Bank of Japan (BOJ) decided to apply negative interest rates - due to domestic investors apart from buying Japanese stocks while shorting the yen, betting the currency will decline against the US dollar.
When foreign investors sold Japanese stocks, they also buy yen to balance short-selling previous state. This move caused the yen appreciation - be investors considered signals continue to sell stocks because many Japanese companies are dependent on the currency cheap to maintain profits.
It is worth noting that foreign investors have a large influence in Japan as much as 60% of transactions on the Tokyo Stock Exchange. This proportion a decade ago to 38%.
But exactly what led investors to panic? Granted, the BOJ decided to apply the interest rate is a measure sound dramatic, but this policy is not strong enough and was made in a hurry.
Moreover, the application of negative interest rates is also recognition that the BOJ's quantitative easing program giant has reached the limit. BOJ also has launched a program of quantitative easing is not the right time when panic about the Fed, China and the price of crude oil causing massive sell-off on global markets.
Either way away, losers will be savers Japan. For example, after the BOJ's move, yields on 10-year Japanese dipped into negative territory for the first time happened in this country and at a G7 member countries.
Much of the government bond market in Japan by domestic investors hold - this can greatly affect savers. Moreover, a characteristic feature of Abenomics are policy changes in the pension fund forefront of Japan to put money in stocks and bonds, domestic and foreign.
Retirement Fund the Government of Japan (GPIF) worth USD 1.13 trillion, as of late October 9/2015, with 43% in stock value compared to 24% time 3 years ago. This Fund will bear the brunt of the sell-off condition and will miss the rally history of Japanese government bonds. Meanwhile, a stronger yen also negatively affect the access of foreign assets of the GPIF.
