Yen Jumps on Risk Sentiment, Japanese Repatriation Pressure

Speculators around the world are worried that the earthquake, the tsunami, and the nuclear disaster will cause their casino to collapse on their heads, which naturally benefits the yen as it is the main victim fundament of all speculative games. It is inconceivable that without the perennial availability of easy money from the BoJ, any of the subprime, stock, or commodity bubbles would have inflated to the extent that they did.

The U.N. Security council holding a special meeting, the Japanese asking for help from the IAEA and the U.S., citizens locking themselves up in their houses hoarding food and goods, and warnings of massive blackouts in Tokyo and elsewhere have not placed the market in an exceptionally pessimistic mood today. We believe that this is a reaction to the last days` sharp sell-off, as bargain hunters try to get their hands on "cheap" stocks, while sellers take a break. But there is still some discussion among Japanese authorities regarding the necessity of putting the Nikkei Stock Exchange on holiday for a while.

At Fukushima, the pools that store the spent fuel of the past 20 years or so were exposed completely to the air yesterday after explosions destroyed the concrete casing of one of the reactors, and attempts to cool the fuel rods failed. Today the Japanese Self-Defense Force (SDF) was flying helicopters over the reactor building trying to raise water levels in the exposed fuel rods, but it is reported that the pools can hold up to 200 tons of water, so to fill them up the SDF must deliver nearly 50 tons of water per day, which may not be a very easy task. Additional support was brought in from the Japanese police force to spray water from 50 meters at the reactor with mobile fire-fighting vehicles. In both cases, radiation levels had previously prevented the activation of such plans, but now the risk to public health is so great that the Japanese government is understandably sacrificing some members of the security forces. The legal limit for radiation exposure has been doubled in order to maintain workers at the facility pumping, spraying pouring water on the fuel rods.

Gold is up, yen is back near 79 per USD and stock prices are all higher around the world today as the market shakes itself out of the gloom and doom mood to wait and see mode for a while. Nonetheless, with turmoil in the Middle East ongoing, and Portugal`s rating downgraded by two notches yesterday, there is ample cause to keep the mood suppressed and prevent a breakout from taking place. At the same time, perhaps one positive consequence of all this mayhem from the point of view of the speculator will be a slowing of the pace of Chinese rate rises and counter-inflationary measures. Provided that the Japanese crisis can come to an end in the near future, and Ben Bernanke smiling, markets may have reasons to find the upside more attractive.