Endless printing of money to purchase assets and bonds in Japan is a real game-changing initiative. It devalues what had become a very overvalued Yen but creates problems for the rest of us. Japan’s current $1.4 trillion or so of inflation efforts and asset buying is creating a situation in the currency markets which we have not seen in quite some time: Dollar/Yen parity.
The US Dollar is now at 99.85 Yen and the last time we had Dollar/Yen parity was back in April 2009 when the United States stock market was bouncing heavily from the early 2009 selling climax lows. And now we are seeing the parity challenge at a time when the DJIA and the S&P 500 Index are hitting all-time highs.
The moves in Japan have been unprecedented and for all practical purposes seem uncanny. The WisdomTree Japan Hedged Equity (NYSEMKT: DXJ) is up a whopping 26% so far in 2013, while the iShares MSCI Japan Index (NYSEMKT: EWJ) is up 15% so far in 2013.
The ProShares UltraShort Yen (NYSEMKT: YCS) exchange-traded product is actually leveraged two-times (200%) of the inverse of the daily dollar price of the Yen. This is up over 30% year to date in 2013 and hit a new high since 2009.
On a personal note, would it be too much to ask the Bank of Japan to just split its currency 100-for-1 now? That would get the yen on par (or real parity) with the rest of the world’s major currencies. We won’t hold our breath on that wish.
If you look below you can see the five-year chart from Bloomberg on the Dollar/Yen.