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TOKYO (Jiji Press) — Japan’s benchmark Nikkei 225 average shed over 2,200 points Friday to mark its second-biggest point loss ever, following an overnight plunge in U.S. shares amid growing worries over a slowdown in the U.S. economy.
The Tokyo market tumble also followed Thursday’s falls in major European stock indexes. On Friday, stock prices dropped in South Korea, Taiwan and Australia as well.
The Nikkei 225 average closed at 35,909.70, down 2,216.63 points, or 5.81%, from Thursday, the biggest loss since the record plunge of 3,836.48 points logged on Oct. 20, 1987, the day after the Black Monday U.S. stock market crash.
Investor sentiment was dampened by dismal U.S. economic data released on Thursday, including the U.S. Institute for Supply Management manufacturing purchasing managers’ index for July.
The yen entering a correction phase after its historic depreciation also weighed on Tokyo equities, with expectations of upswings in corporate earnings thanks to a weaker yen rapidly waning, market sources said.
“Overseas investors started avoiding Japanese stocks,” a major Japanese brokerage house official said.
“Investors not used to a Japanese interest rate increase kept selling Japanese shares,” an official at a midsize securities house said.
Selling hit across the board on the Tokyo Stock Exchange, with the semiconductor and financial sectors affected particularly badly. The TSE’s top-tier Prime section saw its total capitalization drop by ¥132 trillion from its peak of ¥1,003 trillion scaled July 12.
The dollar weakened against the yen on speculation that the gap between Japanese and U.S. interest rates would shrink.
Bank of Japan Governor Kazuo Ueda has hinted at the possibility of the central bank continuing an interest rate increase campaign following a hike announced Wednesday. Meanwhile, U.S. Federal Reserve Chair Jerome Powell recently said that the Fed may cut interest rates in September.
In Tokyo trading, the dollar stood at ¥148.84-84 at 4 p.m., down from ¥149.85-85 at 5 p.m. Thursday.
Meanwhile, Japanese government bonds attracted buying, reflecting overnight rises in U.S. Treasury securities and Friday’s tumble of the Nikkei average.
In Tokyo interdealer bond trading, the yield on the latest 10-year JGB issue, Japan’s benchmark long-term interest rate, fell to 0.955%, the lowest level since June 20.
