On Tuesday morning (August 6th), the Japanese stock market rebounded significantly, following the largest single-day decline since the 1987 Black Monday the previous trading day. Other Asia-Pacific markets also saw gains after opening.
Last week, the unexpected interest rate hike by the Bank of Japan pushed up the yen, leading to three days of stock sell-offs.
Despite a major drop in the U.S. stock market on Monday evening with the S&P 500 plummeting by 3%, on Tuesday, the Japanese stock market opened strong and continued to rally, surging by as much as 10.7% at one point. As of 11:06 local time, the Nikkei average index had risen by 3,011.12 points, a gain of 9.57%.
Subsequently, the yen-dollar exchange rate also fell by over 0.62% to 145.07.
On Tuesday, Japanese Prime Minister Fumio Kishida told reporters that in a market experiencing severe volatility, it is important to make calm judgments amidst the turmoil.
Kishida expressed optimism about Japan’s economic prospects and highlighted that real wages in Japan had seen their first increase in over two years after adjusting for inflation in June. He stated, “We recognize that the Japanese economy is continuing to transition strongly to a new phase.”
Japanese Finance Minister Taro Aso also made similar remarks on Tuesday, mentioning that the government would monitor and analyze financial market trends closely and collaborate with relevant departments.
The largest historical increase in the Nikkei index was 14.2% in October 2008.
Other Asian markets also experienced similar rebounds, with the Korea Composite Stock Price Index (KOSPI) surging by 4.5% in early trading. The South Korean stock market closed down by over 8% on Monday, marking the largest single-day decline in 16 years.
On Monday, the Taiwan stock market closed down by 1807.21 points, a drop of 8.35%, the largest one-day closing drop, but it also rebounded by 4% after opening on Tuesday.
On Tuesday, many benchmark companies in Japan saw significant gains, boosting related sectors. Soy sauce manufacturer Kikkoman’s stock price surged by over 17%, automaker Honda rose by more than 15%, and semiconductor equipment manufacturer Tokyo Electron gained 15%.
Atul Goyal, a stock analyst at Jefferies, stated that while fear gripped the market, the declines in some Japanese stocks on Monday were “too extreme.”
Tomochika Kitaoka, Chief Equity Strategist at Nomura Securities, highlighted that financial, telecommunications, industrial, and certain technology sectors were the main buying focus on Tuesday.
Kiran Ganesh, Multi-Asset Strategist at UBS, also mentioned that the fundamental outlook did not change by 11% to 12% over the weekend, emphasizing that the sharp sell-off presented buying opportunities, but the market needed to observe the movement of the yen.