Asia Stock Market Hit by "Air Raid"; Japan's Market Plunges 4,500 Points, Near Collapse

**Preface**

On August 5th, the Japanese stock market suffered a severe plunge, with the Nikkei 225 index's decline expanding to 12% during the midday session, falling nearly 4,500 points intraday.

The Tokyo Stock Price Index (TOPIX) also triggered the circuit breaker mechanism due to a drop of 8%, officially entering a technical bear market, and even our country, China, was affected...

What is the main reason for the plunge in the Japanese stock market? And why is China also impacted?

**Japanese Stock Market Plunges by 4,500 Points**

Since the "Bank of Japan" raised interest rates on July 31, 2024, the yen has appreciated significantly, putting immense pressure on Japanese companies that rely on exports. This appreciation of the yen has led to a bleak profit outlook for exporters, subsequently affecting the stock market's performance.

It is also due to the yen's appreciation and the unclear economic prospects that market confidence in the Japanese economy has been severely hit, with both the TOPIX and the Nikkei 225 index experiencing significant declines. The TOPIX fell by 24% from the record high it touched last month, and the Nikkei 225 index recorded the largest single-day drop in its history.

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Market concerns that the Federal Reserve will delay action to address the slowdown in the U.S. economy have further increased market uncertainty and panic sentiment.

Traders also anticipate that there will be continued interest rate hikes within Japan, making investors more cautious about the future economic environment and thus reducing their willingness to invest.Greetings esteemed readers, the author is working overtime on the keyboard until the early morning hours, only making a few tens of dollars a day. Writing is truly not easy, so to earn a little more, I have included ads that unlock after a 5-second viewing, allowing free access to the full text. I hope you, the audience, will not scold me for this.

Moreover, with the release of corporate quarterly earnings announcements, corporate profitability has also put pressure on the stock market. Consequently, the Bank of Japan decided to reduce the scale of government bond purchases over the next 1 to 2 years, which surprised the market and triggered selling.

As a result, global market turmoil, including a sharp drop in U.S. technology stocks, has also had a negative impact on the Japanese stock market.

On August 5, 2024, the Japanese stock market experienced violent fluctuations, with the Nikkei 225 index's decline expanding to 12%, falling nearly 4,500 points intraday. At the same time, the Tokyo Stock Exchange Index triggered the circuit breaker mechanism, suspending trading.

Although the market had widely expected the Bank of Japan to maintain an accommodative monetary policy, the unexpected rate hike severely damaged investor confidence, leading to massive selling.

Weak U.S. non-farm employment data, geopolitical tensions, and instability in the Middle East have all negatively affected market sentiment.

The Tokyo Stock Exchange Index has fallen more than 20% from its July high, entering a technical adjustment range, further intensifying market panic.

Not only was the Japanese stock market affected, but markets in the Asia-Pacific region, such as South Korea and Australia, also saw significant declines. Overall market indicators show that global stock markets are in turmoil.

【This may mark the end of the "weak yen and strong stocks" era】

Weak U.S. non-farm employment data have also sparked market concerns about the economic outlook. It is important to note that the U.S. non-farm employment population increased by 175,000 people in April, seasonally adjusted, the lowest increase since October 2023, failing to meet expectations of 243,000 and the previous value of 303,000.This further indicates that the weak performance of the US non-farm employment data in July, with only 114,000 new jobs added, far below the market expectation of 175,000, and the unemployment rate unexpectedly rising to 4.3%, the highest since October 2021, led to a collective lower opening of the three major US stock indices.

The sharp decline in asset prices during the bursting of the Japanese economic bubble also caused a severe shock to the economy. After the bubble burst, the Japanese economy fell into a "balance sheet recession", where the plummeting asset prices affected the real economy comprehensively and deeply impacted the stability of the financial system.

At the same time, the balance sheets of companies and banks are highly sensitive to the real estate and stock markets. The decline in asset prices has severely impacted the balance sheets of companies, creating a large amount of non-performing debts that drag down the economy.

Regarding the issue that the change in the Bank of Japan's policy may end the era of "weak yen and strong stocks", it may come to an end due to the change in the Bank of Japan's policy. At the monetary policy meeting in December 2022, the Bank of Japan unexpectedly expanded the upper limit of the yield curve range, leading to a sharp decline in the Japanese stock market and the appreciation of the yen.

Therefore, it can be inferred that with the adjustment of the Bank of Japan's policy, especially the end of negative interest rate policy and YCC policy, and the cessation of purchasing ETFs and J-REITs, the era of "weak yen and strong stocks" may come to an end in the future.

These changes also reflect the measures taken by the Bank of Japan to cope with domestic inflationary pressures and stabilize the value of the currency, and also show the impact of changes in the global monetary policy environment on the economies of various countries.

As China, the world's second-largest economy, its economic policies and market performance will also be affected by changes in the international environment. However, under our socialist system with Chinese characteristics, the macro-control ability will ensure the stable development of China's economy, safeguard national economic security and the well-being of the people.

【Asia-Pacific stock markets encounter "Black Monday"】It's just that "the heavens can be unpredictable," and nothing is absolute. The stock markets in the Asia-Pacific region encountered a "Black Monday" on August 5, 2024, with several major stock indices plummeting sharply, triggering market panic.

It's not just the United States and Japan that have experienced stock market declines; even our country and South Korea have been affected...

The South Korean Composite Stock Price Index (KOSPI) fell sharply at the opening and triggered the circuit breaker mechanism, marking the sixth time since 1998 that the circuit breaker has been activated.

As of now, the KOSPI index has fallen by more than 6%, breaking through the 2,500-point threshold.

The Nikkei 225 index also saw a significant decline, quickly falling after the opening and eventually expanding its drop to 6%, with the Tokyo Stock Exchange index also triggering the circuit breaker mechanism.

Similarly, the stock markets in Australia and Hong Kong, China, were severely impacted, both experiencing substantial drops.

In the past, Hong Kong, China, could "benefit from both sides," enjoying the advantages of capital flows between China and the United States. However, this situation has changed, with international funds led by the United States starting to withdraw from Hong Kong, while there has been no significant increase in mainland Chinese capital going to Hong Kong. This has left the Hong Kong stock market without financial support, making it naturally difficult to attract investors.

Although so far, the mainland of our country has not been explicitly affected, if the overall environment continues to be poor, it's only a matter of time...

In fact, the reason for this stock market crash is also closely related to the United States. The deterioration of the United States' main economic indicators has exacerbated investors' panic psychology.

So, overall, it is due to the turmoil in the U.S. market and the policy动向 of the Bank of Japan that the stock markets in the Asia-Pacific region suffered a heavy blow on this day, with all major stock indices showing significant declines and triggering the circuit breaker mechanism.【Conclusion】

The recent plunge in the Japanese stock market is the result of a combination of factors, including unexpected policy changes, global economic uncertainty, and pressure from technical adjustments.

It is the interplay of these factors that has led to the sharp market fluctuations and a significant decline in investor confidence, which we need to be vigilant about...