Japanese stocks fall to worst decline since 1987 amid rising yen, recession fears
(MENAFN) On Monday, Japanese stocks experienced a dramatic crash, marking their largest single-day decline since the Black Monday market crash of 1987. The Nikkei index plummeted by 12.4 percent, following a global stock market rout last week and escalating concerns about economic instability. This severe downturn was further exacerbated by a significant rise in the yen, which reached a seven-month high against the dollar. The Nikkei's drop has now brought the index down by 27 percent from its peak of 42,426.77 on July 11, resulting in a staggering loss of 113 trillion yen (approximately USD792.32 billion) in market value.
The collapse was particularly pronounced in Japan's banking sector, which led the broader market decline. Kyle Rodda, a senior financial markets analyst at Capitalin Melbourne, explained that the sharp appreciation of the yen is not only putting downward pressure on Japanese stocks but is also negatively impacting carry trades. Investors who had borrowed yen at low interest rates to invest in higher-yielding assets, especially U.S. technology stocks, are now facing difficulties. This situation is compounded by recent developments such as the Bank of Japan's interest rate hike and the unwinding of yen-funded interest rate spreads.
The Nikkei's loss of 4,451.28 points on Monday represents its worst one-day drop ever, surpassing the previous record of 3,836.48 points lost on October 20, 1987, during the global stock market crash. The yen's recent rise, up 2.5 percent to 142.96 yen per dollar and increasing by 14 percent in less than a month, has been driven by a combination of factors including the Bank of Japan's recent rate hike and the unwinding of yen-based financial strategies. This turmoil underscores the severe impact of currency fluctuations and economic uncertainties on Japanese financial markets.
MENAFN06082024000045015682ID1108521189
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.