Japan’s Nikkei 225 and TOPIX indexes experienced a severe downturn on Monday, plummeting more than 13% each and entering bear market territory. Both indexes have now erased all gains achieved in 2024.
The Nikkei 225 dropped 13.5% to close at 31,078.0 points, while the TOPIX fell 12.2% to finish at 2,227.15 points. This marks their lowest closing levels since November and represents a decline of over 25% from the record highs reached in July.
The sharp decline in Japanese equities is part of a broader global risk-off trend, triggered by weak U.S. economic data that intensified recession fears. Japanese markets were particularly hard-hit by this global sell-off, compounded by recent actions from the Bank of Japan.
The Bank of Japan’s decision to raise interest rates and adopt a more hawkish stance unsettled markets, leading to a significant unwinding of recent gains. Investors began adjusting their expectations for higher interest rates and less supportive monetary conditions in Japan.
Additionally, the Japanese yen strengthened in response to these rate hikes, putting further pressure on export-driven Japanese stocks, which dominate the Nikkei and TOPIX indexes. The yen’s appreciation, driven by safe-haven demand, added to the strain on Japanese equities.
The decline was exacerbated by profit-taking in technology stocks, particularly following a correction in the artificial intelligence sector, which further weighed on Japanese market performance.
Overall, the combination of global economic uncertainties and domestic monetary policy shifts has led to a turbulent period for Japan’s major stock indexes.
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