Japan’s Nikkei 225 index rose over 10% in early trading on Tuesday to above 34,500, rebounding sharply from its 31,458 close the previous day.
The rebound marked the largest daily gain since October 2008 and its highest-ever daily rise in terms of index points. Meanwhile, the broad-based Topix finished at 2,434.21 on Tuesday, showcasing a 9.3% daily rise.
On Monday, Nikkei 225 plummeted 12.4%, in what is considered the largest daily sell-off since the 1987 Black Monday crash. The sharp drop was largely attributed to the Bank of Japan’s decision to raise interest rates to their highest level since 2008, causing the yen to strengthen to a seven-month high.
“If you wake up in the morning to discover that Japan is down 10-12%, it’s going to scare the daylights out of the sanest person in the world, so it’s understandable that people take flight,” IG chief market strategist Chris Beauchamp told Reuters.
“On the flipside, I think people got a bit carried away yesterday and it always seems very dramatic at the time,” he said. “It’s normal to see weakness this time of year. The question is – was that enough to reset markets or is there going to be more?”
Nonetheless, on Tuesday, Japan’s heavyweight trading houses showed gains of over 5%, with Mitsui up 10.43% and Softbank Group Corp jumping 12.06%. Japanese automakers and semiconductor suppliers also saw rises, with Suzuki Motor and Renesas Electronics being up 17.01% and 19.06%, respectively. The yen weakened 1.45% to trade at 145.6 against the U.S. dollar.
Japanese Finance Minister Shunichi Suzuki said that the government will continue to monitor financial markets, working closely with the country’s central bank.
“The impact of the Bank of Japan’s policy shift on interest rates, public finances and the economy must be carefully monitored,” Suzuki told a meeting of finance officials. “We will calmly assess the current situation and take all possible measures to manage the economy and finance while cooperating with the Bank of Japan.”
Global markets also looked steadier on Tuesday. In the US, S&P 500 futures were up 1%, while Nasdaq futures rose 1.4%. Meanwhile, Europe’s STOXX 600 index was up by 0.7%.
In addition to the reaction to the Japanese rate increases, the Monday market meltdown was also attributed to the weak US economic data published late last week, which showed the nation’s unemployment rising to its highest level in nearly three years, reaching 4.3%. In addition, the ISM index fell to 46.8 in July, the lowest it has been at since November 2023.
