Nikkei dives 6.4%,its lowest since early April

Abenomics: Optimism over the govt’s efforts to reinvigorate economy loses steam

Written by New York Times | Hong Kong | Published: June 14, 2013 1:18:54 am


The battered Japanese stock market lurched into bear market territory Thursday,after a tumble of 6.4 per cent took the combined decline in the Nikkei 225 index since a peak on May 23 to more than 21 per cent.

A pronounced sell-off in the morning and early afternoon accelerated shortly before the markets closed in Tokyo. The Nikkei ended down more than 840 points at 12,445.38,its lowest level since early April.

Global markets reacted badly at first,with the Euro Stoxx 50 down almost 2 per cent in morning trading. But European shares later recovered most of their losses,and stocks on Wall Street opened quietly after new reports showed recent improvements in the US economy.

The drop in Japan on Thursday was one of many sharp declines seen in recent weeks,since a feverish six-month rally in Japanese stocks — incited by optimism over the government’s aggressive efforts to reinvigorate the listless economy — came to an abrupt end.

The Nikkei 225 soared more than 80 per cent between mid-November and mid-May,but staged a sudden about-face with a 7.3 per cent plunge on May 23.

Sentiment has been fragile and trading volatile ever since,as investors have taken stock of the challenges that face “Abenomics,” the economic policies of Prime Minister Shinzo Abe,and weighed the pros and cons of taking profits after the rally.

A renewed rise in the yen also has eroded a factor that,for months,had worked to support Japanese stocks. The yen weakened substantially between November and May — a welcome development for Japanese exporters as it made their goods less expensive for customers overseas.

But the currency’s move reversed in late May. On Thursday,the yen traded around 94.00 to the American dollar,its strongest level since early April.

Bank of Japan governor,Haruhiko Kuroda,met with Abe on Thursday to exchange views on the economy,according to local news reports. Abe told the governor he was determined to do his part in putting a growth plan into action,Kuroda later told reporters. Kuroda told the prime minister that the central bank was committed to supporting the Japanese economy through monetary stimulus.

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