Tokyo’s key Nikkei index closed more than 10% higher today, bouncing back from a record selloff the previous day on worries over the US economy and a stronger yen.
The benchmark Nikkei 225 index jumped 10.23%, or 3,217.04 points, to end at 34,675.46, while the broader Topix index added 9.3%, or 207.06 points, to 2,434.21.
The Nikkei had plunged more than 12%, or 4,451.28 points yesterday – the largest points drop in its history.
Prime Minister Fumio Kishida said today it was best to approach the sharp swings with a cool head as analysts predicted that volatility could continue for days.
“The stock market has been moving again today, and I think it is important to judge this situation calmly,” Kishida said at a scheduled news conference.
“We will continue to monitor the situation with a sense of urgency and to carry out economic and fiscal management in close cooperation with the Bank of Japan,” he said.
The decision by the Bank of Japan to raise rates last week appears to have spooked markets, according to Danni Hewson, head of financial analysis at AJ Bell.
That, coupled with weak US jobs data on Friday, contributed to yesterday’s slump.
“We had a big sell-off in the United States on Friday and that just carried through to Asian markets yesterday,” she said, speaking on RTÉ’s Morning Ireland.
That sell-off in Japan was exacerbated by so-called carry trades, where cheaper currencies are used to make trades in higher interest rate areas.
“Because Japan’s interest rates have been so low a lot of investors had been borrowing in Yen then buy riskier assets like equities in other countries where there is a higher rate hike,” she said. “Of course the change in currency has then impacted that decision-maker – some of it automatic.”
Nomura Securities said the market would likely remain volatile this week. “Today’s gain can be explained in one phrase: a technical rebound” after the sharp fall, it said.
IwaiCosmo Securities said concern over the US economy had been partially assuaged by a better-than-market-expected improvement in service-sector business sentiment for July.
“In Japan, real wages in June turned positive for the first time in 27 months, which also brought some relief,” the brokerage added.
The yen stood at 145.94 against the dollar, compared with 146.28 in early trade. The Japanese currency hit 141.70 yesterday, its strongest value since early January.
A higher yen is a negative for Japanese exporters, and recent rallies were fuelled by central bank policy decisions that reversed months-long trends.
The Bank of Japan last week raised interest rates for the second time in 17 years, with talk of another rate hike to come, while the US Federal Reserve has hinted at a cut as soon as September.
Among major shares in Tokyo today, Honda roared 14.70% ahead to 1,435.5 yen following a report that it was expected to announce a record quarterly profit.
Toyota spiked 12.81% to end at 2,518 yen and Sony Group jumped 9.12% to finish at 12,315 yen.
Article Source – Tokyo’s Nikkei index closes up 10.2% after previous day’s record fall – RTE
