Japanese Nikkei fell again on Monday owing to concerns related to its two biggest export markets. The Nikkei 225 lost 3.7 percent before closing at a six-week low of 13,261.82, due to fears over scaling back of US bond buying programme and weak manufacturing data from China, says a report from BBC.
Apart from these two, concerns over the adequacy of the Japan’s recent policy moves are also fueling the sentiments of the investors.
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As per an analyst from Fujitsu Research Institute in Tokyo “The fears of a slowdown in the global economy have given rise to an uncertainty about the demand for Japan’s exports, despite the weaker yen.” Also, the long term sustainability of the Bank of Japan’s policies is a concern for the investors, he added. This has “put the brakes” on the recent run in the Japanese equity market, analysts said.
Nikkei, last week
The Japanese index has been extremely volatile last week. On Thursday, the index fell 5.2 percent to 13,589.03 points, which was its lowest since late April. Then on the next day, the Nikkei gained 1.4 percent. A week before that the Nikkei made a record by declining 7 percent in a single session. The decline was the biggest since the 2011 earthquake and nuclear disaster. The exchange has lost 15 percent since hitting the five-and-half-year high in May.
The Japanese authorities have introduced a number of measures in the recent times to get the economy back on the growth path.
Some of the measures include plans to double the country’s money supply and keeping interest rates low by purchasing long-term government bonds. The main objective of these measures is to increase spending and domestics demand backed by low interest rates and constant money circulation. The Bank of Japan also revised its inflation target to 2 percent to enhance the domestic consumption.
The Japanese yen, as a result of these measures, has fallen about 30 percent against the US dollar since November last year.
Confidence in the measures and better profits for exporters due to the falling yen has moved the stock market up by as much as 80 percent since mid-November.
Analysts also believe the recent run has provoked many traders to book profits that also contributed somewhat to the recent fall in the markets.
“With price increases of that level over such a short period of time, one expects some kind of reversal, which we’re having at the moment,” said Daniel Needham, chief investment officer at Morningstar, Inc. (NASDAQ:MORN).