The Japanese Stock Market: How The Nikkei 225 Crash Shook The Global Markets

The Japanese stock market saw its biggest loss on a single day today. The Japanese index Nikkei 225 fell by a staggering 4,451 points in just one day, which is the biggest fall in its entire history. The index fell by a whopping value of almost 13 per cent today that is on Monday. For many investors and analysts, this reminded them of the Black Monday back in October 1987, when the world markets suffered a setback and saw a plunge. The Nikkei had lost 3,836 points on that day which had shook the markets. 

The Interest Rate Rise In Japan

This fall in the Japanese stock index comes at a time when the Bank of Japan (BOJ) only last week announced that it would be increasing the interest rates. This was done in the light of controlling and containing inflation in the economy. This is the second hike of this year 2024. This could have further added to the bearish attack. The fall is so deep that trading was even halted in Japan and South Korea for short periods of time so that people wouldn’t end up panic selling which would further deteriorate the market. These temporary measures are known as circuit breakers. 

Why Did The Markets Crash?

The US Factor

The reasons behind this crash could be the slowing growth in the major economies of the world. The US and its major companies have been reporting lower growth and this has also led to the fear of people losing their jobs. Many firms like Amazon and Intel might go for labor reduction methods to prevent and cut down their losses. According to Goldman Sachs, the fear of a recession in the US has climbed to 25% from 15% some time back. The Fear and Greed Index, indicates prevailing fear which cannot be a good sign. 

Disturbances In The Middle East

Along with this the prevailing tensions between Israel and the Hamas and now, Israel and Iran, have further added to the bearish run in the market. Instability in the Middle East creates suspicions about the oil prices and the trading and investing markets in general. 

Impact On Global Markets And On India 

This volatility in the Japanese market spread to the other markets of Asia, and Europe too. The US stocks also fell overnight. Taiwan’s Taiex fell by 8.4% while South Korea’s Kospi went down by 8.8 per cent. In India too, the Sensex and Nifty indices crashed. They fell by roughly 3% on each of the two indices. Although a significant amount of the market wealth was actually wiped out, the situation in India remained much better than in the other Asian markets. A probable reason for this could be that the Indian markets are greatly dependent on their own domestic wealth rather than foreign money or funds.