Probably the most profitable Central Bank play of all time?- Part 3

On Friday we published part 1 and 2 of the same headline title. So, if you want to have another look at both of those this morning, then please do so, because it will help you put in better context what we are about to add here. 

We noted how the MOF and the BOJ had bought a huge amount of Japanese stocks and how that had underscored the surge in the Nikkei 225 to a record seen just last month, at 72,831. That stock market play went hand in hand with the Yen falling to its lowest level versus the dollar this year, at 162.84 also seen just a few days ago this month. So, now we turn the clock back to July 2024 and note how the USD/JPY collapsed from 161.95 to below 140 in a couple of days. The thing is; so did the Nikkei 225, which crumbled into a bear market in the space of just 2 days at the same time. 

So, whilst the BOJ and the MOF are keen to stop the Yen weakening, it is also a problem for them if they want to per perpetuate the record rise in the stock market. We have noted this conundrum many times before and commented on how the BOJ want their cake and eat it. Well this morning the MOF have been talking about the GPIF (largest public pension fund in the world) and how they might like to tweak their current holdings more in favour of domestic stocks. That news sent the USD/JPY to a new session high around 162.36, but it has stepped back again since. 

There will be more to add folks on all this because this is a major dynamic playing out before us in the markets, with potential for ground-breaking moves over time. The USD/JPY is right now at 162.15