While I suggested that a recession might trigger a mini boom bust cycle in Japanese stocks, I harbored doubts that this would be the case. As I wrote yesterday
In today’s world, bad news have been seen as good news, as markets continues to expect more and more bailouts which drives market pricing apart from fundamentals, thus entrenching the boom-bust cycles.
From today’s Bloomberg:
Asian stocks rose as investors await a decision by Japanese Prime Minister Shinzo Abe to put off a sales-tax increase, add stimulus and call an election, after data yesterday showed the economy entered recession.
The USD-yen is back at its 116 handle.
If hope has now been the only strategy for Japanese policymakers, hope has also presently anchored the market’s pricing process. This demonstrates how central banks-governments have destroyed the essence—the fundamental discounting and price discovery mechanisms—of capital markets.
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