FILE - A person walks past at an electronic stock board showing financial indexes at a securities firm in Tokyo, June 27, 2024. (AP Photo/Shuji Kajiyama, File)
TOKYO: Japanese stocks tumbled to their weakest levels since early January on Monday, extending last week's selloff triggered by the rout in global stock markets and worries investments funded by a cheap yen were being unwound.
The Nikkei share average fell 4.63% to 34,247.56 by the mid-day break after sliding as much as 7% to 33,369.37, its lowest level since early January.
The index's losses of 21% from its peak in July mean it is in bear market territory per some market definitions. It is also down 15% in three sessions, and appears set for its biggest three-day plunge since 2011.
"Domestic equities tanked purely because of the worries that the U.S. economy may be heading to a recession," said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities.
U.S. stocks sold off for a second straight session on Friday, and the Nasdaq Composite index confirmed it was in correction territory after a soft jobs report stoked fears of an oncoming recession and expectations for a big Federal Reserve rate cut in September.
The yen was last up nearly 1% at 145.11 per dollar after touching its highest since mid-January of 144.76 earlier in the session.
"I think the dollar-yen will shift to the 140-145 zone because of the worse-than-expected non-farm payroll and Middle East tensions," said Ryota Abe, an economist with SMBC in Singapore.
"The stronger yen will also weigh on the Nikkei as corporate margins will fall, as many corporates did not expect such a sharp and sudden rise of the Japanese yen at all."
The yen is up 10% against the dollar in just over three weeks, driven in part by the Bank of Japan's interest rate rise last week and an unwinding of yen-funded carry trades.
"The question now is whether we keep selling stocks or buy them back," said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Intelligence Laboratory.
"I think the market will be unstable till around October, but I would buy them back now because the fundamental factors that lifted the index to its peak have not changed," he said, citing corporate governance reforms.
Chip-making equipment maker Tokyo Electron tanked 8.8% to be the biggest drag on the Nikkei. Uniqlo brand owner Fast Retailing fell 1.5% and technology investor SoftBank Group lost 7.2%.
The banking sector slumped 12% to become the worst sector among the Tokyo Stock Exchange's 33 industry sub-indexes.
The broader Topix fell 5.73% to 2,392.27, with Mitsubishi UFJ Financial Group dropping by 12%.
Toyota Motor lost 6.98%. - Reuters
