Japanese stocks firmed up significantly today, with their main index adding more than ten percent. It erased a substantial part of Monday’s losses. In points terms, the index posted its strongest rise in its history, Kyodo news agency reported. Monday’s fall was the most significant since the so-called Black Monday on the stock exchanges in October 1987.
Weaker US labour market helped
The main Nikkei 225 index gained 10.23 percent to close today’s trading at 34,675.46 points. In absolute terms, it rose more than 3,217 points. The broader Topix index added 9.30 percent to 2,434.21 points. But the sharp recovery, helped by a weaker Japanese yen, comes after Monday’s massive drop that hit virtually all major stock markets around the world. The main cause, according to analysts, was a statistic late last week that the US labour market was weaker than expected.
In view of some other unfavourable data of the past few days, some economists are talking about an impending recession in the United States. The dollar briefly firmed to 146 yen, helped by better-than-expected July data from the US services sector. These helped ease some of the fears that the world’s largest economy is heading for recession. As a result, US government bond yields also rose.
Japanese prime minister urges caution
“Fundamentally, nothing significant has changed for the Japanese economy,” said abrdn’s chief analyst Ray Sharma-Ong. Foreign traders are cutting back on so-called carry trades, in which they borrow Japanese currency at low interest and then buy stocks in Japan with that currency, he said. Comments from US Federal Reserve officials also contributed to the market recovery.
Meanwhile, Japanese officials tried to calm the markets, with Prime Minister Fumio Kishida urging caution. Representatives of the Ministry of Finance, the Bank of Japan and the Financial Services Authority held talks over the situation on the financial markets. However, the outcome of the meeting was not immediately known.
Source: Czech Press Office
