Nikkei, JGB Double-Whammy: "Please Do Not Worry..."

Another masterpiece from williambanzai7 at Zero Hedge. Click to enlarge, for full glory.

Haruhiko Kuroda, governor of Bank of Japan, had just repeated his mantra at a press conference on May 22, one day before the Nikkei collapsed over 1,000 points, that (according to Nikkei Shinbun 5/22/2013 article):

• Long rate is rising because the rates in Europe and the US are rising [Let's blame others, that's the Japanese way]; and

• BOJ's purchase of JGB compresses the risk premium, and the effect will get stronger as BOJ buys more [Let's flat-out lie, until people actually believe it]

• He doesn't expect the long rate to jump, under the rate-lowering pressure from quantitative and qualitative easing [And let's lie some more..]

BOJ's purchase of JGB since early April has been nothing but disaster, with risk premium widening. The 10-year bond yield dropped to 0.315% on April 5, 2013, the day after Kuroda announced a new and improved quantitative easing of 7 trillion yen per month. The 10-year yield was 1% on May 23, 2013, 200% jump from the low on April 5.

Some "compression", Mr. Kuroda. Maybe it's another BOJ Newspeak, where "inflation" is "price stability". "Expansion" therefore must be "compression".

Yesterday's Nikkei fall started right after Kuroda's BOJ injected 2.8 trillion yen into the bond market to stabilize the (again) extremely volatile market as the bond futures trading was halted.

So what's the official excuse for that fall?　As far as the semi-official story in Nikkei Shinbun (5/24/2013) goes, the consensus views are:

• The correction has nothing to do with the (economic) fundamentals [which they call "fandamentaruzu" in katakana transliteration to disguise what it actually means];

• It is just profit-taking, in a stock market that has risen 80% since November 2012 [So they do think the market that rose 80% in 6 months reflects economic fundamentals of Japan. Sure.];

• [And sure enough,] Japanese economy is on a solid footing;

• The Nikkei level after the fall on May 23 is just about right, even a little bit cheaper; and

• BTFD (Buy The Failed Dip), with "animal spirit".

As you see, all is well. Keep repeating the lies and soon everyone will believe them and make the lies come true. That's what the Japanese government has been effectively doing, since March 11, 2011 in particular.

The magnitude of the Nikkei fall is unmistakable, though. From Bloomberg.com's homepage, chart that plots Nikkei, FTSE, Dow:

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