What to Know About the Record Nikkei 225 Decline?

A Rapidly Strengthening Yen

The Bank of Japan increased the base rate to a quarter last Wednesday, the second rate increase since 2007. The change was made amid improving inflation rates and heightened market confidence.

However, the Bank of Japan may have failed to account for exporters that take advantage of the weak yen to reap record profits. They may also neglect investors who borrow in yen to invest in other markets.

A Worrying Unemployment Rate

The US Job Report, updated last Friday, showed a considerable slowdown in hiring, intensifying fears that the market is nearing a recession. This is compounded with the delayed decrease of US interest rates by the FED, with investors worrying that it would threaten the strength of the US economy.

A Global Stock Crisis

A market crisis second only to the Global Financial Crisis of 2007 thus followed. The S&P 500 index fell by more than 3%, negating gains this year; the Nikkei 225 plunged by 12.4% to a record low; the FTSE 100 in Europe fell by 2%. This reversed previous market gains driven by improving inflation, satisfactory unemployment rates, finally emergence and expansion within the Artificial Intelligence field. The crisis extended to oil futures, gold, and even cryptocurrencies like Bitcoin.

Continuing Instability

Although the Nikkei 225 recovered by 10.2%, the highly volatile market conditions foreshadow dramatic changes to come: investors should be aware and cautious of this situation and make appropriate investments to their portfolio.

References

(n.d.)
(N.d.-a). Nytimes.com. Retrieved August 6, 2024, from https://www.nytimes.com/2024/08/05/business/nikkei-global-stocks.html

(n.d.-b)
(N.d.-b). Nytimes.com. Retrieved August 6, 2024, from https://www.nytimes.com/2024/08/05/business/global-stocks.html?pgtype=Article&action=click&module=RelatedLinks