By Tim Seymour
The last two Bank of Japan (BOJ) meetings have meant volatility en masse for not only Japan (Nikkei and yen), but also for global markets. In fact, the disappointment surrounding the June policy meeting, combined with Fed rhetoric, took most risk assets to their lows in July. Emerging markets certainly were carried out on a stretcher. Kuroda will summarize this week's BOJ event with a speech tomorrow. The question for markets is: Will this time be different?
Right now we get the purpose and direction of Abenomics, but we are still struggling as to whether the "third arrow" can hit the bullseye, or if it will miss the target and puncture market psychology. In May, the Nikkei moved 17% from the policy meeting/Kuroda commentary to the lows before finding its footing, and in June the move was 7.75% to the lows. Low-hanging fruit is off the vine in terms of rhetoric and mild policy change. Japan still needs a major overhaul of its regulation and industry controls to lift the economy out of stagnation.
I have to say I'm a little surprised by the relaxed approach people are taking to the BOJ meeting this week when the last two events were epic in terms of their impact. It might be time to hedge up a little bit.