Japan’s Nikkei drops more than 10% in worst losses since 1987 | News

Fears about the health of the US economy are hitting Japan’s stock market and stock indexes across Asia.

Japanese stocks posted their biggest losses since October 1987, extending last week’s sell-off spurred by concerns that the US economy may be weaker than previously thought.

The Nikkei stock average fell 10.01 percent or 3,595.30 points to 32,314.40 in early afternoon trading, its lowest level in months.

The index has fallen sharply since its July peak and is on track for its biggest two-day drop ever.

“Domestic stocks plummeted purely because of concerns that the US economy may be heading towards a recession,” said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities.

U.S. stocks were sold off for the second session in a row on Friday after a weak jobs report raised fears of a looming recession and expectations that the Federal Reserve will make a sharp rate cut in September.

The prospect of lower interest rates weighed on the dollar, boosting the yen.

The Japanese currency rose nearly 1 percent to 145.11 per dollar, after hitting its highest level since mid-January at 144.76 earlier in the session.

“I think dollar-yen will move towards the 140-145 zone due to worse-than-expected non-farm payrolls and tensions in the Middle East,” said Ryota Abe, economist at SMBC in Singapore.

“The stronger yen will also weigh on the Nikkei as corporate margins will fall as many companies did not expect such a sharp and sudden rise in the Japanese yen.”

Yen rises 10% as Bank of Japan rates rise

The yen has risen 10% against the dollar in just over three weeks, driven in part by the Bank of Japan’s interest rate hike last week.

“The question now is whether we continue selling shares or buy them back,” said Seiichi Suzuki, chief stock market analyst at Tokai Tokyo Intelligence Laboratory.

“I think the market will be choppy until around October, but I would buy them back now because the fundamental factors that drove the index to its peak have not changed,” he said, citing corporate governance reforms.

The Nikkei’s biggest single-day loss was a drop of 3,836 points, or 14.9 percent, in a drop dubbed “Black Monday” in 1987. The benchmark is now roughly at the level it was a year ago.

Meanwhile, Indian stocks fell about 2% on Monday, the biggest intraday drop in two months, and Taiwan’s benchmark index sank 7.9% to its lowest level since late April, the worst intraday drop since May 2021. Stocks in South Korea lost more than 5% in the worst drop since the start of the COVID-19 pandemic in March 2020.

In Southeast Asia, Singapore’s benchmark index fell 3.6 percent, marking its worst day in more than two years, while stocks in Indonesia and the Philippines lost about 2 percent.