Tokyo stocks have lost their early gains as they tumbled back into the red, a day after suffering the worst one-session drop since Japan’s March 2011 quake-tsunami disaster.
The benchmark Nikkei 225, which on Thursday tumbled 7.3 per cent, was down 3.37 per cent, or 488.64 points, at 13,995.34 at 1445 AEST on Friday afternoon, before halving that loss just a few minutes later.
The wild market swings erased a brief morning rally that saw the benchmark index surge more than three per cent.
“Players rushed to profit-taking after a moderate gain in the morning because they wanted to lock in their gains ahead of the weekend,” said Toshikazu Horiuchi, a broker with IwaiCosmo Securities.
“Trading is extremely nervous. Once the Nikkei turned into negative territory, selling led to more selling.”
The dip also came as the US dollar weakened on the yen which tends to drag on the Tokyo market.
Earlier on Friday, Kenji Shiomura, strategist at Daiwa Securities, said Thursday’s eye-watering plunge was a temporary correction to the recent fast-paced advances with investors taking a cue from weak Chinese data and other negative news.
“There has not been any grave event that could change corporate earnings outlooks and what happened yesterday should be a correction to the recent excessive rises,” he said.
Japan Inc. wrapped its latest corporate earnings season on a high note, with a weaker yen helping inflate earnings at some of the nation’s top exporters as it makes them more competitive overseas and increases the value of their repatriated foreign income.
The Nikkei has gained nearly 60 per cent over the past six months under the pro-spending, pro-growth policies led by Prime Minister Shinzo Abe, who took office in December after landslide elections.
Aggressive monetary easing by the Bank of Japan has helped push down the yen, which in turn tends to lift shares of Japanese firms.
Despite the upbeat sentiment among some analysts, others warned that Tokyo’s meteoric rise may stall with a correction overdue.
The “slump is not necessarily the end of the bull market in Japanese equities, but the next few months will be much harder going”, London-based Capital Economics said in a note.
In New York, the Dow Jones Industrial Average slipped 0.08 per cent to 15,294.50 on Thursday, little affected by a sharp sell-off in Asian and European markets led by the plunge in Tokyo.
“The steadiness in the US market was helped by better-than-expected data out of the US, including better-than-expected US new home sales… higher US house prices and a welcome pullback in jobless claims after last week’s unexpected rise,” National Australia Bank said.
In currency markets, the dollar was trading at 101.45 yen in Friday afternoon trade, weakening from 101.82 yen in New York late Thursday.
The euro fetched $1.2928 and 131.13 yen against $1.2935 and 131.72 yen in US trade.
