November 18, 2016, 4:30pm EST

In my November 2 note (here), I talked about three big changes this year that have been underemphasized by Wall Street and the financial media, but have changed the outlook for the global economy and global markets.

Among them was Japan’s latest policy move, which licensed them to do unlimited QE.

In September they announced that they would peg the Japanese 10 year government bond yield at ZERO. At that time, rates were deeply into negative territory. In that respect, it was actually a removal of monetary stimulus in the near term — the opposite of the what the market was hoping for, though few seemed to understand the concept.

I talked about it earlier this month as an opportunity for the BOJ to do unlimited QE, and in a way that would allow them to keep stimulating the economy even as growth and inflation started moving well in their direction.

With this in mind, the Trump effect has sent U.S. yields on a tear higher. That move has served to pull global interest rates higher too — and that includes Japanese rates.

You can see in this chart, the 10 year in Japan is now positive, as of this week.

With this, the BOJ came in this week and made it known that they were a buyer of Japanese government bonds, in an unlimited amount (i.e. they are willing to buy however much necessary to push yields back down to zero).

Though the market seems to be a little confused by this, certainly the media is.  This is a big deal. I talked about this in my daily note the day after the BOJ’s move in September.  And the Fed’s Bernanke even posted his opinion/interpretation of the move.  Still, not many woke up to it.

What’s happening now is the materialization of the major stimulative policy they launched in September. This has green lighted the short yen trade/long Japanese equity trade again.  It should drive another massive devaluation of the yen, and a huge runup in Japanese stocks (which I don’t think ends until it sees the all-time highs of ’89 — much, much higher).

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