Charts of the Month - June '22

Charts of the Month - June '22

The BoJ Experiment, Policy Makers Constraint Framework, Particulate Emissions from Tires, Post Secondary Enrollment, Refiners and Crack Spreads

Tim Purcell
Tim Purcell

BOJ Bond Purchases

The Japanese Yield Curve Control / Debt-to-GDP story keeps on gaining steam, and rightfully so.

Roger has covered it extensively here and here. USDJPY charts are popping up all over twitter as the currency depresses to a multi decade low, and Grant Williams just published an in-depth history of how Japan got into this fiscal and monetary pretzel (my words, not his) and what comes next (behind the paywall).

To visualize just how historic this recent attempt at controlling their yield curve is, take a look at last month’s BoJ bond purchases…

Bank of Japan bond purchases

…all to achieve this little kink on their yield curve.

Japanese yield curve

Japan was the first country to adopt QE, and it’s frequently seen, as 13D puts it, as the “laboratory" for monetary policy. Its actions should be carefully scrutinized as it might offer a glimpse of where other central banks are headed in the future.

There’s a lot of things happening on the financial, economic, political, and geopolitical stage these days that looks unsustainable, and the BoJ’s balance sheet sits right atop that shaky hierarchy.

U.S. Share of Monthly Job Postings

Small breaks in long-term trends can produce outsized impacts.

The de-globalization / re-shoring story has become widely adopted since the Russian invasion of Ukraine (even though some people, like our guy Jacob, have been talking about it for a long time), and one way to observe what that looks like is by observing where jobs are coming and going.

The West’s outsourcing of their labor force to cheaper overseas countries is well understood and has been a key driver (alongside peak population growth and tech innovation) of the disinflationary / lower cost of goods era of the last few decades.

This is a relatively small sample size, but it looks like that trend may have just begun to reverse:

In a world of already uncomfortable inflation driven by monetary excesses, supply chain disruptions, and war, increasing the cost of labor (by reshoring jobs away from cheap labor) will add to the uncomfortable backdrop of higher prices for consumer goods.