The Financial Times reported that Japanese stocks surged on August 6, with the largest daily range since October 2008, leading the high-growth markets across Asia in a stunning reversal of the global sell-off the previous day.
The Topix index rose over 10% as investors began to hunt for bargains and the yen stabilized at around 144.607 yen per USD after a strong increase in recent weeks. The recovery of the Topix index and the 9% increase of the Nikkei 225 index occurred despite a sharp decline overnight on US markets, including a 3% drop in the S&P 500.
Global stock markets have declined in recent days due to concerns that the FED is reacting too slowly to signs that the US economy is weakening and may be forced to implement a series of rapid interest rate cuts. Japanese stocks were hit the hardest, falling over 12% on August 5 - the largest decline in 37 years - a few days after the Bank of Japan unexpectedly raised interest rates.
However, the recovery on August 6 also drew attention. A series of stocks in Tokyo surged, led by soy sauce producer Kikkoman, with a stock price increase of over 17%, car manufacturer Honda increased by over 15%, and semiconductor equipment manufacturer Tokyo Electron increased by 15%. At one point, the Nikkei 225 index rose 3,453 points - the largest daily gain to date.
The rebound in the Japanese stock market was so strong that trading in Nikkei and Topix futures was automatically suspended during the morning session on August 6.
"Although the market has recovered significantly, the overall picture remains unstable - will the Bank of Japan raise interest rates again this year and will the FED cut interest rates?" - Takeo Kamai, a CLSA stock expert in Tokyo, said.
The global sell-off has become more severe due to the cancellation of what is called the yen interest rate swap, in which investors have taken advantage of Japan's low interest rates to borrow yen and invest in other currencies or assets in markets with higher interest rates.
However, "we finally see stability in the foreign exchange market, with support for the yen at 145 per USD" - Jason Lui, Head of Equity and Derivatives Strategy Apac at BNP Paribas, said.
The recovery on August 6 also occurred on other Asian markets, with the Kospi index of South Korea rising 3% during the morning session.
