Japanese stocks fall the most in 8 years

The Topix index had its worst session since 2020, as a rise in the yen raised investor concerns about falling corporate profits.

At the close of trading on August 2, the Nikkei 225 index (Japan) fell 5.8% to 35,909 points. This was the deepest drop of this index since March 2020, according to FactSet data. This was also the first time the Nikkei 225 fell below the 36,000 point mark since January.

The Topix index fell more sharply, down 6.14% - its worst day in eight years. The index closed at 2,537 points.

An electronic board outside a securities company in Tokyo, Japan, on August 2. Photo: Reuters

The biggest loser on the Nikkei 225 was Daiwa Securities, down 18.9%. Other stocks that also fell were telecommunications group SoftBank (8%), trading house Mitsui (10%) and Marubeni (8%).

The yield on 10-year Japanese government bonds also fell, falling below 1%. This is the lowest level since mid-June.

Analysts say the main reason for the decline in Japanese stocks is the rising yen, which can reduce the profits of Japanese companies, as their exports become less competitive in the world and their overseas profits when converted into local currency decline.

The yen has been strengthening against the dollar since early July, as Japanese authorities intervened in the currency market and the interest rate gap between the two countries began to narrow. On July 31, the Bank of Japan (BOJ) raised its benchmark interest rate to around 0.25%, from 0-0.1% previously. The agency also signaled that it would continue to raise interest rates if the economy develops as expected.

Meanwhile, the US Federal Reserve (Fed) is expected to adjust interest rates in September. Recently, consumers in the US have gradually tightened their purse strings as interest rates and inflation remain high.

Currently, each US dollar is worth 148.9 yen, down from 161 yen per USD in early July. Official figures from Japan's Ministry of Finance also show that in July, the country's authorities spent 5.53 trillion yen ($36.8 billion) to push up the yen.

Many other markets in Asia also fell today. The Kospi (South Korea) closed down 3.6%. The Shanghai Composite (China) fell 0.9%. The Hang Seng Index (Hong Kong) lost 2%. Stocks in Singapore, Malaysia, Thailand, and Australia were also in the red.

Analysts say Asian stocks today were affected by the pessimistic sentiment on Wall Street. On August 1, major US stock indexes fell 1-2%. Investors feared a recession after the world's largest economy announced less optimistic employment and manufacturing figures, and the Fed was judged to be slow to cut interest rates.