Everybody but the Federal Reserve
04/01/2013 7:54 pm EST
On Wednesday and Thursday, April 3 and April 4, the Bank of Japan meets for the first time under its new governor Haruhiko Kuroda.
On Thursday, April 4, the European Central Bank’s board of governors meets for the first time since the Cyprus bank bailout agreement.
Japanese stocks had rallied strongly since November on the odds that post the December election the Bank of Japan would raise its inflation target to 2% from 1% and announce an aggressive program to buy financial assets and weaken the yen. Last week I heard some doubters questioning whether new Bank of Japan governor Haruhiko Kuroda would be as aggressive in weakening the yen through a package of unlimited asset buying as the market was expecting. Those doubts led to a pull back in Japanese stocks that turned into a rout overnight with Tokyo’s Nikkei falling 2.12%.
I think today’s sell off on the lower than expected confidence numbers from the Bank of Japan’s Tankan survey should take those fears off the table. Whatever the Bank of Japan’s moves to date to weaken the yen and to raise inflation expectations, they haven’t been remotely enough. If Kuroda wants to put Japan on a new course—and I believe he does—he’s going to have to be more aggressive rather than less. On this weakness I’d be looking to add exposure to Japanese stocks such as Mitsubishi UFJ Financial Group (MTU), which I added to my Jubak’s Picks portfolio http://jubakpicks.com/ last week.
The European Central Bank is likely to do very little of anything—again--on Thursday with the bank expected to leave its benchmark short-term interest rate at 0.75%. So words will count. Will central bank president Mario Draghi say anything to give hope to those in the EuroZone looking for more growth rather than just endless austerity? Will the bank speak to the increasingly dire situation in the EuroZone periphery economies where the interest rates on the bank loans that many small and medium size companies use to finance operations continue to run well ahead of rates in core EuroZone economies? And what, if anything, will Draghi say about plans for a EuroZone banking union (with unified regulation and deposit insurance) that took a bad beating in the Cyprus crisis? The euro was holding steady today at $1.2854.