It hasn't been easy for investors to find good news in the last few weeks, but the falling oil price should offer some.
And from the perspective of the Japanese, it should be great news.
For months now, analysts have been fretting that the gains for exporting companies from the QE-driven fall in the yen would be offset by the rise in the price of energy (Japan imports the vast majority of its oil).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
With the oil price now down 27% from its peak in the summer, and at its lowest for four years, that shouldn't be so much of a problem any more. Add cheap energy to a cheap yen and Japan should be getting more stimulus than it knows what to do with.
What's more, the combo could soon prompt demands for more stimulus.
The Bank of Japan's Haruhiko Kuroda is committed to creating inflation at 2%. (This doesn't make complete sense see the last two posts in my Japan diary but there you have it.) However, the falling oil price makes this even harder to achieve: energy accounts for over 8% of Japan's core CPI calculation, and inflation is still only just above 1%.
Kuroda has noted that falling oil prices are "a plus" for the economy* but he must also have noticed that they increase the odds of inflation falling below 1% - something he recently said there was "no chance of".
The result is that he will face accusations of failure and demands to print more to push the yen down further and offset falling oil prices. It might sound nuts, but that's modern central banking for you.
On the plus side, we know that QE usually means rising markets so if you are looking for somewhere for your money at the moment (and you realise that there is no such thing as a safe have in modern markets) Japan looks like one place to look.
*More on this in the magazine this week but this isn't just the case in Japan. It is, as Brewin Dolphin note this week, something of an irony that "the current weakness in commodity markets is likely to be substantially more stimulative than the outgoing raft of official measures in the Anglo Saxon economies." Note that petrol prices have fallen 12% plus in the US since the end of June and that even prices in the UK are down 7% or so in the last year.
-
British Airways revamps Avios scheme bringing down flight prices to £1With the new Avios part-payments scheme you can now bag a British Airways flight for as little as £1
-
RBS to close a fifth of branchesRoyal Bank of Scotland plans to shut 18 branches across Scotland, resulting in the loss of 105 jobs. We have the full list of closures.
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the marketsOpinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
