Yen bulls get a judo throw by ex-FX chief

🧠 The Big Brain
Sweden’s economy is wobbling!

There’s nothing especially shocking about the headline itself.

We spoke about Sweden’s warning signs earlier in the year.

And if you go back through the narrative archive (google) you’ll find headlines like “Bankruptcies soar 47%” in February or “Bankruptcies hit decade high” in July.

Those both sound very alarming, but also influenced by the low comparison base the prior year.

So what’s changed now?

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⚡ The Spark
Yen bulls get a judo throw by ex-FX chief

There’s an irony in Hiroshi Watanabe — the diplomat who oversaw Japan’s FX strategy from 2004-07 — making this comment today, since in the early 2000s, there was a cohort of housewives in Japan called the Mrs Watanabes who would gamble in FX markets.

Here’s why it’s important: the Bank of Japan intervened in the currency market for the first time since 1998 last September and have bought the yen in size a few times since.

The wording is key though: many believe it is simply the value of the yen that matters, but the Bank of Japan has mentioned MANY times that it is the volatility that matters more.

Sharp moves are undesirable whilst slow grinds — as Mr Watanabe says — matter less.

Bottom line: read between the lines. For years Japan has desired inflation and growth. Now they might just get it with their policy of keeping monetary policy loose and letting the currency depreciate bit by bit.

Caution: Japan is an energy importing nation. Get the currency too weak and you risk just having expensive energy whilst not stimulating export growth.

💡 The Lightbulb
Turkish inflation MISSES at only 61.53% YoY

Celebrations heard as disinflation kicks in /s

Unreal scenes in Turkey.

We did a TikTok on it…

@fink.tok

#priceinflation in Turkey hits 61.5%! The #inflationcrisis in the nation is worse than most other economies. #highinflation is more of an ... See more

Crazy, right?

It got me Finking: would interest rates have to be near 60% for inflation in Turkey to really start coming down strongly?

Well, this would be the view of the Taylor Rule which is a framework the Fed uses to set interest rates — kinda.

Turkey likely needs interest rates to be at around 50-60% rather than the super low 30% they’re at now.

What to watch for: make sure Turkey is on your radar as a nation which could have more instability soon.

There are minimum wage hikes occurring every few months of 30-40%, and if the Brits decide to stop going on holiday, getting their hair transplants and teeth done there, the economy could be in pain since Turkish GDP is 10% tourism!

Arab Spring: a chart to note…

The Arab Spring really came about due to high food prices in the early 2010s…

Geopolitical instability occurs massively when the public is annoyed.

Turkey food inflation is at 69%!