Oil prices have been falling since June, and they have been literally falling like a rock since October, down from 110 to now 58 dollars a barrel. Obviously the US dollar rise has something to do with it. Another reason is that US production has reached 9.12 million barrels a day -a 30 year high-, while global demand is decreasing. US shale producers are now a threat to OPEC's market share (40% of world's oil), pushing them to offer lower prices to resist.
Analysts and traders think that Oil will keep falling this week, and eventually reach $40. That will be the 10th consecutive weekly drop. Daily ADX is above 60 and all the the flags are red.
I don't trade oil, but if I did I'd be careful trying to catch a moving train, though. Oil needs a pause, for a couple of days.
Observed from Japan, this oil price drop is good news. Well, it depends. Abe and the BOJ are probably not so thrilled about it. But their policy has stricken badly industrial sectors that heavily rely on oil imports, and now the oil price drop offsets the Yen's weakness.
For those who rely on imports but not on oil, the situation is a bit different. Good news for Abe, bad news for Japanese middle-class people: food is getting more and more expensive.
Japan is almost self-sufficient just for rice, eggs, whale meat and mandarin oranges (90%). But for essential ingredients of Japanese cuisine (soy beans, cooking oil etc) the rate is 5%, and more than half of the meat consumed in Japan is imported (mainly from the US and Australia). These imports are getting much more expensive for Japanese companies, and this will affect people's purchasing power.
A symbolic example is the fast-food company Yoshinoya raising the price of its 'gyudon' beef
bowl for the first time since 1990. And its not a small raise: +27% to 380 yens. Yoshinoya explained it has been affected by the spike in US beef import prices due to the weak Yen.
It seems like Abe's agenda is not taking into account the reality of Japan's industrial and social situation. Luckily, the oil price drop is saving Japan some time, delaying Abe's attack on Japan's industry and consumer purchasing power. But a few questions remain unanswered: What's the story behind the 2% inflation target? How and why did they come up with that number? How do you fix a country's economy by attacking the industry and the consumers?
Overall, the BOJ's inflation target seems difficult to reach anyway. The Bank is now worried that core inflation in 2015 will actually be negative. I hope so...
Analysts and traders think that Oil will keep falling this week, and eventually reach $40. That will be the 10th consecutive weekly drop. Daily ADX is above 60 and all the the flags are red.
I don't trade oil, but if I did I'd be careful trying to catch a moving train, though. Oil needs a pause, for a couple of days.
Observed from Japan, this oil price drop is good news. Well, it depends. Abe and the BOJ are probably not so thrilled about it. But their policy has stricken badly industrial sectors that heavily rely on oil imports, and now the oil price drop offsets the Yen's weakness.
For those who rely on imports but not on oil, the situation is a bit different. Good news for Abe, bad news for Japanese middle-class people: food is getting more and more expensive.
Japan is almost self-sufficient just for rice, eggs, whale meat and mandarin oranges (90%). But for essential ingredients of Japanese cuisine (soy beans, cooking oil etc) the rate is 5%, and more than half of the meat consumed in Japan is imported (mainly from the US and Australia). These imports are getting much more expensive for Japanese companies, and this will affect people's purchasing power.
A symbolic example is the fast-food company Yoshinoya raising the price of its 'gyudon' beef bowl for the first time since 1990. And its not a small raise: +27% to 380 yens. Yoshinoya explained it has been affected by the spike in US beef import prices due to the weak Yen.
It seems like Abe's agenda is not taking into account the reality of Japan's industrial and social situation. Luckily, the oil price drop is saving Japan some time, delaying Abe's attack on Japan's industry and consumer purchasing power. But a few questions remain unanswered: What's the story behind the 2% inflation target? How and why did they come up with that number? How do you fix a country's economy by attacking the industry and the consumers?
Overall, the BOJ's inflation target seems difficult to reach anyway. The Bank is now worried that core inflation in 2015 will actually be negative. I hope so...
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