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Hope Gives Way To Confusion In Japan's Markets

posted 31 May 2013, 03:48 by Mpelembe   [ updated 31 May 2013, 03:49 ]


Reuters Business  Report - For a while the Nikkei looked like a one way street, jumping 30 percent in five months as Japan Prime Minister Abe unveiled plans to boost the economy.

But now the other side of the coin with a drop of more than 10 percent in the past week.


"And it looks like a long hot summer where volatility is the new norm."

Investors are selling/buying - then second guessing their strategies.

The fresh stock market volatility has come with a surge in benchmark Japanese government bond yields to a one year high.

Weekly swings of more than 10 percent in the Nikkei are unusual, but now we've seen them twice since April.

But look at the bigger picture and it's relatively mild, swings still pale compared to a few years ago.

Implied volatility has also spiked but not by much compared to the last two financial crises.

The next major crunch point for the Nikkei could come next week, when Abe is expected to announce the third tranche of his national growth strategy.


"And if investors feel his bold stimulus plans are running out of steam, those volatility spikes could become more extreme, or worse, we could see the Nikkei tumble."