'Crash' Japan Nikkei Index, 10% Up in One Day... Record Largest Increase

Rebound Buying Inflow Following Previous Day's Oversold Decline Judgment

The Tokyo stock market in Japan, which had recorded its largest-ever drop due to concerns over a U.S. economic recession, rebounded with the largest gain in history in just one day.

Japan's representative stock index, the Nikkei 225 average (Nikkei index), closed on the 6th at 34,675.46, up 3,217.04 points (10.23%) from the previous session. This surpassed the previous largest gain of 2,676.55 points recorded on October 2, 1990. The TOPIX, Japan's broad stock index, which had plunged 12.2% the day before, also rose 9.3% on this day.

[Image source=AFP Yonhap News]

The Nihon Keizai Shimbun (Nikkei) interpreted this rise as a reaction to the previous day's excessive record drop in the Tokyo stock market, which triggered a wave of rebound buying. The Nikkei index had plunged more than 12% due to a shock in employment and spreading concerns about an economic recession, surpassing the drop of 3,836 points on 'Black Monday' of October 20, 1987, in the New York stock market.

On this day, 95% of the Nikkei index constituent stocks rose, creating a spectacular scene. In particular, semiconductor-related stocks, which are sensitive to economic trends, led the upward momentum. By individual stocks, Toyota Motor, Advantest, and Tokyo Electron rose about 14%, 15%, and 19%, respectively. By industry, shipping surged 16%, leading the gains.

Especially, the partial resolution of performance anxiety that had been widespread among Japanese export companies was evaluated as a major factor in the stock market rebound. Kong Ing Mikuni, Chief Asset Manager at Nissay Asset Management, explained, "Investors see no change in the fundamentals of companies," adding, "Despite the sharp decline, investment behavior has not changed, and they are calmly reviewing performance and statistics."

The improvement in U.S. service sector economic indicators also acted as a tailwind by somewhat easing recession concerns. Earlier, the U.S. Institute for Supply Management (ISM) announced that the July Non-Manufacturing Purchasing Managers' Index (PMI) was 51.4, shifting to an expansion phase in one month from the previous month (48.8), which was the lowest in four years. This figure indicates economic contraction if below 50 and expansion if above 50. Additionally, Japan's real wages for workers in June turned to an increase for the first time in 27 months, also acting as a catalyst for the stock price rise.

However, pessimism continues regarding the sustainability of this rebound buying. Both U.S. and European stock markets closed sharply lower, and geopolitical risks such as concerns over Iran's attack on Israel remain widespread. The Nikkei stated, "The market is not leaning toward optimism, so it will take time for individual investors distressed by the sharp drop to recover," and forecasted, "Unstable prices are likely to continue for the time being."

The dollar-yen exchange rate, which briefly rose to the 146.2 yen level in the morning, was moving around the 145.7 yen level as of 3:40 p.m. The previous day's closing price was around 143.4 yen. Takehiko Masuzawa, head of stock trading at Phillip Securities, diagnosed, "For those who invested a lot of money in yen carry trades to buy stocks, the premise of the exchange rate has changed," adding, "There are many individuals and funds that cannot easily take risks due to lack of funds."

This content was produced with the assistance of AI translation services.