Japanese stocks experienced another sharp decline as weak U.S. jobs data raised concerns about the health of the world’s largest economy, coupled with a strengthening yen.
The Nikkei Stock Average fell 5.2% to 34,043.44 on Monday morning, following a 5.8% drop on Friday. This marked its biggest percentage-point decline since March 2020. Earlier on Monday, the index was down as much as 7.1%, erasing all the gains made in 2024 and plunging 21% from its recent closing high.
The U.S. Labor Department reported on Friday that job growth in July slowed sharply, and the unemployment rate rose to its highest level since 2021. This news caused the yen to strengthen against the dollar. By Monday in Tokyo, the yen was trading at around 145.25 to the dollar, compared to 148.95 on Friday at the close of the Tokyo stock market.
Many analysts anticipate the Federal Reserve will cut interest rates at its three remaining meetings this year. Some economists suggested on Friday that the Fed should act more swiftly to improve its chances of averting an economic downturn.
Financial and exporter stocks led the declines in Tokyo on Monday. Carmaker Subaru Corp. dropped 11%, and Sumitomo Mitsui Financial Group saw a 15% decline. The sharp drops in these sectors highlight the market’s sensitivity to both domestic and international economic indicators.
In addition to the financial turmoil, Japanese companies are bracing for the impact of the yen’s strength on their earnings. Exporters, in particular, are expected to face challenges as a stronger yen makes their products more expensive and less competitive overseas. This could lead to further adjustments in corporate strategies and financial forecasts as businesses navigate the current economic landscape.
