The Nikkei Stock Average fell dramatically during the morning trading session on the Tokyo Stock Exchange, dropping 4,451.28 points, a 12.4% decline compared to Friday’s close. This drop was greater than the one experienced on “Black Monday” in October 1987 when the index fell by 3,836.48 points. The index had already been declining, down 7.1% from Wednesday’s close, which was the worst intraday level since January 5.
Other Asian stock indices also saw losses. The Taiwanese Taiex index dropped by 8%, and the South Korean Kospi fell more than 7% this morning.
The sudden strengthening of the Japanese yen is causing concern, as it could impact the profitability of Japanese companies. Recently, Japanese firms benefited from a weaker yen, which made their products more competitive abroad. However, today the yen surged significantly, reaching over 155 yen per euro and 142 yen per dollar. This sharp rise followed the Bank of Japan’s decision last week to increase its short-term interest rate to 0.25%. The central bank’s governor, Kazuo Ueda, hinted at possible further tightening of monetary policy, leading investors to expect a narrowing of interest rate differences between Japan, the U.S., and the European Union.
The Bank of Japan’s decision to raise the policy rate to 0.25% signals increased confidence in Japan’s economic recovery and concerns about the yen’s weakness. This rate hike is the second since March 19, when the bank ended its long period of negative interest rates. The bank also announced plans to gradually cut its purchases of Japanese government bonds from 6 trillion yen per month to 3 trillion yen by early 2026.
