“It’s no secret that I think the BOJ is making a mockery of the Japanese stock market and is in the process of implementing extremely dangerous policy. This form of explicit asset price targeting puts the cart before the horse and misunderstands the role of secondary markets, in my opinion. And now the upside volatility is coming home to roost as the Nikkei is off a quick 16%+ from its recent highs in what looks like the “poverty effect” that inevitably reverses a “wealth effect” built on quick sand.
As Sober Look notes, Nikkei volatility is now at its highest levels since the Fukushima Nuke disaster. This shouldn’t be terribly shocking. Trying to stabilize and control inherently volatile asset classes is not unlike trying to tame a tornado. And that’s a big part of the equilibrium based economics so many economists rely on these days. The economy is not a linear or stable system. It is in a constant state of disequilibrium which can often be made even more unstable when policy is misguided.
So where to now ? ….”
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