Bank of Japan

The world has yet to fully digest what is currently happening in Japan.

Japan is the global leader for Keynesian Central Banking insanity. The ECB and US Federal Reserve began implementing ZIRP and QE after 2008. The Bank of Japan has been employing both ZIRP and QE since 2001.

Put simply, by the time the Great Crisis of 2008 rolled around, the Bank of Japan had nearly a decade’s experience seeing what QE, ZIRP, and the like could accomplish.

Following a rerun of September 2015, when Draghi sent market expectations about ECB action sky-high only to massively disappoint in December (we will have to wait until March to see if it is deja vu all over again) last week, this week is just as big for central bank jawboning with the FOMC (Wednesday) and the BoJ meeting on Friday, with hopes that they will at least hint of more easing if not actually do much.

In retrospect it appears Tom DeMark was spot on with his Wednesday prediction, made just as the Dow Jones was down some 500 points that that very day was "an interim low" to be followed by a 5-8% rebound (at which point the selling would resume). In fact, those trading Japanese stocks saw virtually the entire predicted rebound take place in just one day as the Nikkei soared by almost 6% overnight, or nearly 1000 points, the biggest jump in 4 months, while risk everywhere else around the globe has likewise exploded higher, as crude has stormed back over $31/barrel.

Excerpted from JPMorgan CIO Michael Cembalest 2016 Outlook,

Something is wrong with this picture.  In the US and Japan, corporate profits sank during the global financial crisis.  In the US, the profit recovery was accompanied by a recovery in household income.  In Japan, however, corporate profits and household income moved in opposite directions, as dynamics that helped profits recover did not help consumers.  

For all the talk that the BOJ would unleash more stimulus, buy REITs, more ETFs (both existent or non-existent), or outright stocks, today the USDJPY did something it has not done in 7 weeks: the world's preferred carry trade currency just slumped to the lowest level since early November. If it wasn't for  the recent bounce in crude, and if the traditional USDJPY-ES correlation pair had not broken down as a result, the S&P would be well below 2000 at this moment.