The Bears Devour Abenomics

The Financial Postreported Japanese stocks falling below 13,000 for the first time in two months. 12,754 would signal a return to bear territory.

All this despite the news from Japanese Prime Minister Shinzo Abe that firing up the printing presses would finally pull Japan out of a two-decade slump.

According to Takuya Takahashi, a strategist at Daiwa Securities, “right now there are conflicting views. A U.S. economic recovery should be positive for the Japanese market, but if the Fed cuts its stimulus because the economy is showing sustainable growth, it hurts the market.”

In other words: Fears over the end of our stimulus has led to the stock slump in Japan.

In fact, our central bank stimulus is even more important to Japan than our economic growth!

As our own Dan Amoss noted a few days ago, stimulus is a dangerous drug. Central bankers know it. Mervyn King, outgoing governor of the Bank of England, said “larger and larger doses of stimulus are required” in order to achieve the merriment enjoyed by the markets today. Any mere mention of “tapering” sends markets into fits.

What happens to the global market once it’s gone? We may find out soon.

Jason Farrell

For The Daily Reckoning