Japan Inc.

The following in red from Real Money is ominous. If true, it means the Nikkei trades above 8K at least through the end of the month. What happens after? Do equity fall to their natural levels (whatever those are) until March next year?

 March 31 is the end of the Japanese fiscal year. Japanese banks own a lot of Japanese equities that are counted as reserves by the Basel accord standards. The 8,000 level on the Nikkei is considered a level below which the value of Japanese bank holdings in Nikkei listed equities may be below the level required to the Basel rules. In other words they would insolvent and according to international agreements they would be disallowed to operate as as international correspondents. That would mean their letters of credit, the backbone of international commerce, would no longer be acceptable. At any rates, it hasn’t happened yet. Every time the Nikkei 8,000 level area converges with the March fiscal year end the BOJ and fiscal authorities goose the equity markets to ensure the year closes out above that level.

Advertisements