Future of Foreign Exchange Markets 第108回［田嶋智太郎］
Tomotaro Tajima Profile
Economic analyst. Alfинаutz President and CEO. Born in 1964 in Tokyo. After graduating from Keio University, he switched career from Mitsubishi UFJ Securities, where he previously worked, and now analyzes and researches a wide range from finance and the economy to strategic corporate management, and even personal asset formation and fund management. He serves as a lecturer at lectures, seminars, and training sessions hosted by private companies, financial institutions, newspapers, local governments, and various business groups, with about 150 speaking engagements a year. He has contributed to numerous print media including serialized columns and quotes in weekly magazines such as Shukan Gendai's "Net Trade Rules" and Igzamina's "Money Maestro Training Course." He also writes stock and foreign exchange columns on many websites and is highly regarded as a stock and FX strategist. He has also contributed to the Home Economics section of the Shakai Kinyūsha's "Basic Knowledge of Contemporary Terms." After regular appearances on TV (TV Asahi "Yaju-uma Plus," BS Asahi "Sunday Online") and radio (MBS "Me-chan's Asa-ichi Radio"), he currently serves as a regular commentator on Nikkei CNBC's "Market Wrap" and Daiwa's Securities Information TV's "Economy Marche." Major DVDs include "Very Easy to Understand: Tomotaro Tajima's FX Introduction" and "Very Easy to Understand: Tomotaro Tajima's FX Practical Technical Analysis." His major books include "Manual for Reassessing Wealth" (Paru Publishing), "FX Chart 'Formula for Profit'" (Alchemix), "Why Can FX Make You Wealthy?" (Teksuto), among many others. His latest title is "How to Profit by Riding the Rising U.S. Economy" (Shakai Kinyusha).
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※This article is a reprint/rewriting of an article from FX Tracking.com April 2019 issue. Please note that the market information written in the text differs from the current market.
Will the U.S. and Japanese stock markets and economies rise a bit more?
As noted in the previous update in this column, the international financial markets from late last year to early this year were excessively pessimistic. Looking back a little, one trigger was the remarks by Fed Chair Jerome Powell at a luncheon of the New York Economic Club in late November last year, which indicated the Federal Reserve's own “uncertainty (policy direction not yet set in a single direction).” As a result, toward the end of December, U.S. and Japanese stock prices plummeted dramatically, and the dollar-yen exchange rate faced strong selling pressure.
Then on January 3, in a moment the dollar-yen fell below 105 yen in a “flash crash,” and Chairman Powell had to step in to calm the markets. As is well known, this occurred on January 4. On that day, at the opening of a gathering of economists nationwide, Powell read a policy stance prepared in advance, including “flexibly reviewing monetary policy” and “if problems arise, we will not hesitate to correct including balance sheet normalization.”
In other words, going forward there was an implicit suggestion that the Fed might temporarily pause rate hikes or reconsider so-called “quantitative tightening,” and this realization dramatically changed market sentiment. In a sense, this could be called “the road once traveled.” Throughout history, when an economy recovers from a recession and begins to expand, central banks, fearing rising future inflation, sometimes push monetary policy ahead of the business cycle (an example being the Fed’s four rate hikes in 2018).
However, when that makes the economy's outlook uncertain, monetary policy that was initially normalizing (or tightening) tends to tilt dovishly. As a result, the economy again begins to pick up, but from then on, monetary policy tends to merely chase the economy for a while. This could be described as the "destiny" of monetary policy.
The result of this is the formation of bubbles. Of course, such bubbles eventually fail to fit together in many places and will eventually “collapse,” but economic bubbles will flare up their flames first.
Therefore, I personally forecast that U.S. and Japanese stock prices and economies will likely rise a bit more.
