Japan's Decission

Japan is really at a major fork in the road. It's GDP grew at 5.5% this past quarter. Exports and investment spending have been plentiful and it seems that they have finally kicked there 16 year economic slump. So the $64,000 question is what will the Bank of Japan do?

That's a good question and the answer seems fairly obvious, or is it? The ridiculously low interest rates set by the BoJ are having their impacts. The stock market has recently had a major breakout, and home/land prices are red hot. Although this contradicts the recently adjusted "official" CPI which is .1% for the final quarter. I hope that you realize that statistic is bogus. Remember the recent change to the official CPI immediately dropped it by .5%, and if I were a betting man, I would guess the one before it was bogus.

Anyways, I have no official data to prove this, but I'm positive that the BoJ is under extreme pressure from other central banks to hold their interest rates steady at .5%. Let's look at the ultimatum here. Japan has to make the decision between gradually increasing interest rates and sending shock waves to global markets, or raising rates to stabilize their own economy. Don't forget the notion of keeping any credibility from a economic stand point.

Let me make this point very clear, the Japanese Yen is the most undervalued and manipulated currency in the world. The BoJ eventually will HAVE to raise interest rates. We saw the result of the .25 raise which led to the 400+ point decline in the U.S. stock market. The Yen carry trade can not, and will not last. In interest rate hike in Japan will force the carry traders to short their positions. When this happens they will be forced to BUY Yen in order to pay back their loans. If you have access to forex currency trading of any sort, buy Yen, Swiss Franc, and the Euro.