If you thought Greedspin was shucking and jiving, you should see the one act play that is currently playing out in Tokyo. The BOJ (that's Bank of Japan, as in Central Bank) is adding liquidity faster than you can say Sake! The "normal" overnight money fund transactions are typically ones in which the BOJ leaves about 1 trillion yen in the system. On Friday things must have picked up a bit as they added 2.5 trillion, then on Monday they added 4.7 trillion, then last night, they added a record 9.1 trillion yen to meet liquidity demands. For those of you who're bad at math, this means their needs are doubling every twenty four hours to meet demand. That's a lot of yen. In case you were wondering since the exchange rate has been around 1.02, that's roughly equal to about 8.8 trillion dollars. And yet this story has appeared NOWHERE in US news reports. To read the local papers, the banks here are all trying to catch their breath after having avoided Y2K bank runs. Unfortunately, it's a bit soon for that type of crap.

Shits in the fan kids, lock and load! Crude was up today again. Surprise.

For educational and research purposes only:

The yen easily weathered the BOJ's decision to leave a staggering 9.1 trillion net surplus in the money market, more than twice Monday's 4.5 trillion yen, which itself was a record.

FOREX-Yen stays buoyant in absence of BOJ action By Shinichi Kishima LONDON, Dec 28 (Reuters) - The yen remained broadly buoyant on Tuesday, quickly recovering early losses amid persistent year-end commercial demand in the absence of Bank of Japan intervention. Expectations the Japanese economy would continue to recover next year and Tokyo stocks would extend gains underpinned bullish sentiment on the yen, although wariness of BOJ action kept dollar/yen well inside a relatively tight monthly range between 101.20 and 103.80 yen for December. Michael Rottmann, currency strategist at HypoVereinsbank in Munich, said the dollar's range-trading with some downward bias would likely continue until the next meeting of Group of Seven finance ministers to be held in Japan in January. "Until then, the MOF (Ministry of Finance) and the BOJ will cap pressures on the downside, but this won't change the trend," he said. "We still believe that the low end of the range is somewhere between 101 and 102, more or less based on fear of intervention, and the upper end should be between 103 and 104." The greenback did briefly hop as high as 102.70 yen in Asia as a few buy orders made a big splash in a very illiquid market. That in turn stirred talk of BOJ involvement, but dealers were sceptical and the dollar quickly faded below 102.50. With the year's business drawing to a close, order flows appeared to be dominated by last-minute commercial yen buying, namely repatriation of foreign currency receipts by Japanese exporters into yen, and some hedging activity. The yen easily weathered the BOJ's decision to leave a staggering 9.1 trillion net surplus in the money market, more than twice Monday's 4.5 trillion yen, which itself was a record. The BOJ said the surplus was boosted to prevent Y2K pressures from inflating the key overnight rate, which it has long kept around 0.02 percent. Tokyo dealers said the huge surplus blurred the argument over "unsterilised intervention", in which the BOJ leaves extra yen funds in the private sector resulting from its forex intervention in order to subdue demand for yen. The BOJ has long argued such a policy is meaningless. Indeed, dealers found it hard to see what difference it would make by leaving Friday's intervention unsterilised when the transactions settled today, as it probably amounted to a couple of billion yen amid an overall surplus of nine trillion. "The intervention is small beer," said a dealer at a European bank. "You can't even spot it amongst all this liquidity." Today's helping of Japanese economic data was again too mixed to provide direction for the market. The unemployment rate dipped rather unexpectedly to 4.5 percent in November from 4.6 percent. But the Tokyo consumer price index which showed a steep 1.5 pct fall year-on-year in December, the biggest drop since 1971, while wage earner's spending fell a real 2.4 pct year/year in November. Meanwhile, the euro was stuck in a very tight band [M] [T] [NAT] [MF] [D] [FN] [N] [BL] [SW] [NW] [P] [PTGF] [CTPT] [DA] [OE] [US] [FRX] [DE] [JP] [WEU] [EUROPE] [EUR] [LEN] [RTRS] [XREF]

-- Gordon (g_gecko_69@hotmail.com), December 28, 1999

Answers

Bank Of Japan leaves record Y4.5 trillion net money mart surplus

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=0027HR

-- (M@rket.trends), December 28, 1999.

Actually, I believe the exchange rate is 102 yen to the dollar (yen worth about a penny, much stronger than just two years ago). So it's more like 88 billion dollarsstill a bunch, but not one and a half times the US national debt.

-- zippo (zeebo@zongo.com), December 28, 1999.

Yes Gordon, liquidity is the cornerstone of the BOJ Y2K policy. I mentioned this planned cash infusion several months back.

I think it's important to clarify that this cash infusion into reserve is not based on their needs as you said. It was a planned and telegraphed plan to bolster reserve.

-- This is a cash society and it requires the average person to carry around loads of cash daily. You have to remember that beef costs about $13 per pound and a "Christmas Cake" not much bigger than a hockey puck (vanilla cake with a little frosting and a few strawberries on top) costs $30.

-- The cash reserve is for businesses and consumers, but consumer demand for cash was very high yesterday. Banks are closed as of this morning until January 4th. I stood in line to get a final balance entered into my bank books for 30 minutes yesterday at my local branch. Banks are usually full this same day every year, but yesterday was something special. The banks sent letters and asked everyone to get a balance before yesterday.

-- There was not a "run" on banks, but a lot of cash went out the past few days. There are no limits at Japanese banks or ATM machines. I can pull the equivalent of $10,000 in cash from an ATM (and I've done it before).

Speaking of runs, I have to run now...

P.S. To those who I haven't replied to your email: I will soon. No disrespect intended!!

Cheers...

-- PNG (png@gol.com), December 28, 1999.

I hate this Japanese keyboard...

-- PNG (png@gol.com), December 28, 1999.

How fast can one convert monopoly money to hard assets?

Watch me!

-- Squid (ItsDarkest@down.here), December 28, 1999.

Sounds as if they're following Greenspan's lead to keep the bubble stable until rollover. How do you say "keep happy, sheeple" in Japanese?

WW

-- Wildweasel (vtmldm@epix.net), December 28, 1999.

Howdy PNG,

Sorry we couldn't hook up when I was there. Thanks for the advice.

-- MoVe Immediate (MVI@yepimhere.com), December 28, 1999.

PNG, you didn't mention 6 bucks for a beer.

-- MoVe Immediate (MVI@yepimhere.com), December 28, 1999.

Wait a minute here. According to what I'm reading, this is NOT a run on the banks, it was NOT done to meet public demand for cash, it was NOT a surprise move, and Gordon has overstated it by two orders of magnitude!

Oh well, y'all can return to your regular programming now -- the media are covering up a bank run.

-- Flint (flintc@mindspring.com), December 28, 1999.

Not so fast, there, Flint. Now explain why the amount of money they were dumping into the BOJ was roughly doubling every 24 hours. Is this SOP??????????? Surely not.

-- preparing (preparing@home.com), December 28, 1999.

"...I can pull the equivalent of $10,000 in cash from an ATM (and I've done it before)."

No doubt useful when visiting the local McDonald's.

-- but it' s not enough if (you@want.fries), December 28, 1999.

Gordon, it looks like the BOJ will continue the 'Daily Double' pattern. Thanks for all of your research and posts, I have learned a great deal from reading them since finding TB2000.

*for discussion purposes only*

Japan Bond Futures at 6-Month High as BOJ Allays Y2K Fund Shortage Concern By Martin Foster

Tokyo, Dec. 29 (Bloomberg) -- Japanese bond futures rose to a six-month high on expectations the Bank of Japan will provide ample funds to allay concerns about cash shortages should computers malfunction at the start of 2000.

The Bank of Japan may leave a surplus of around 20 trillion yen ($195 billion) today, up from 9.1 trillion yen yesterday. The record surplus is likely to keep the lid on short-term rates, making it attractive to buy bonds with borrowed funds. ``I'm looking for investors to buy cash bonds at the start of 2000 given the backdrop of ample funds in the short-term money market,'' said Toshiatsu Idenuma, director of fixed-income at Kyokuto Securities Co.

The 10-year futures contract for March delivery rose 0.20 to 133.04, topping 133 for the first time since June 10. Yesterday, the No. 218, 10-year bond fell 0.09, or 44.5 yen per 50,000 yen bond, to 101.617. The yield rose 1 basis point to 1.710 percent, after falling last Wednesday to 1.704 percent, its lowest level since Oct. 6.

A Bloomberg News survey saw the Bank of Japan increasing the surplus to 14.6 trillion yen. The BOJ's extra surplus helped keep the overnight unsecured call rate at 0.02 percent, which is 169 basis points lower than the yield on 10-year bonds. Lower overnight rates help make it cheaper for major investors such as banks to buy bonds with borrowed money.

-- Possible Impact (posim@hotmail.com), December 28, 1999.

Never claimed to be a currency trader or a rocket scientist. My point stands, the liquidity being added is unprecedented.

My other point is that this IS NOT being widely reported in the US. I suspect our own liquidity is in question at this moment.

And I disagree with PNG regarding where this "plan" is comming from. There are most certainly massive withdrawals occuring from the postal savings system as we speak.

I don't give a crap how much beef n beer costs.

-- Gordon (g_gecko_69@hotmail.com), December 28, 1999.