Japan's Nikkei Plunges 6%, Largest Single-day Decline In 36 Years

Akira Ito
02 Aug, 2024
Tokyo

Stocks in Tokyo plunged the most in the last four decades after key economic data in the U.S. stoked fears of a recession.

The Nikkei 225 stock average declined 5.8%, and the Topix index plunged 6% amid a global sell-off after weak U.S. manufacturing and labor market data. 

The Nikkei 225 drop on Friday was only surpassed by the fall on Black Monday of October 1987, when the index plunged by 3,836.48 points. 

Diverging monetary policy and the yen's weakness contributed to market jitters, driving hedge funds to sell their positions. 

Investors shifted their attitude to the growing possibilities of a U.S. recession after weekly initial jobless claims approached a one-year high, unit labor cost increases slowed to 0.5% in the second quarter, and factory activities shrank at a faster pace for the third month in a row in July. 

The Bank of Japan's hawkish shift also contributed to market jitters, and the yen rebounded to 148.67 against the U.S. dollar. 

The unwinding of the speculative trade, where hedge funds borrow in the yen and lend in the U.S. dollar or the euro, also contributed to a sharp reversal in the sentiment. 

The Bank of Japan unexpectedly lifted its policy rate to 0.25% from a range between zero and 0.1%, surprising market watchers, as policymakers responded to political pressure after the yen sank to 162 against the yen. 

 

Japan Stock Movers 

The Nikkei 225 dropped to the lowest level since January 22, and the Topix index declined to the level last seen at the end of January. 

The Nikkei 225 stock average dropped 5.8% to 35,909.70, and the Topix index declined 6.2% to 2,537.60. 

Financial, chipmakers, industrial and vehicle exporters, and technology stocks were among the leading decliners in Friday's trading. 

Tokyo Electron, Advantest, Screen Holdings, and Lasertec plunged between 14% and 9%. 

Mitsubishi UFJ Financial, Sumitomo Mitsui Financial, and Mizuho Financial declined between 11% and 13%. 

The largest trading companies, or sogo shosha, Marubeni, Mitsubishi, Mitsui, and Itochu, declined between 11% and 14%. 

Konami Group Corp. jumped 2.8% to ¥11,420.0 after the gaming company reported better-than-expected quarterly results in the fiscal first quarter ending in June. 

Revenue increased 24% to 90 billion yen, and net income advanced 43% to 19.2 billion yen from a year ago, respectively. 

The company estimated fiscal year 2025 revenue of 380 billion yen, lower than the previously estimated 393.8 billion yen, and net income of 59.5 billion yen, lower than the previous estimate of 66.34 billion yen.