Japan Stocks Drop Nearly 6% Amid US Economic Worries

Japanese stocks experienced a significant decline on Friday, with the Nikkei 225 index dropping 5.8%, marking its largest single-day fall since March 2020. This downturn was largely influenced by growing apprehensions regarding the US economy and anticipation of further interest rate hikes from the Bank of Japan (BOJ). Concurrently, US futures indicated a weak opening for Wall Street, with the S&P 500 futures down 0.9%. The BOJ recently raised interest rates by 15 basis points to 0.25%, its second increase this year, and announced plans to reduce bond purchases. Market participants are bracing for additional rate hikes as the central bank aims to combat inflation. The US dollar has depreciated over 4% against the yen since mid-September, further weakening by 0.3% to 148.9 on Friday. Analysts warn that increased volatility in the yen could jeopardize the long-standing bull market in Japanese equities, particularly affecting exporters' profits. In the broader Asian market, South Korea's Kospi fell by 3.7%, Hong Kong's Hang Seng Index decreased by 2.1%, and China's Shanghai Composite dropped 0.9%. The economic landscape was further complicated by new data indicating a rise in first-time jobless benefit applications, reaching an estimated 249,000, the highest since November 2021. Analysts from ANZ noted that weak manufacturing data has led markets to adjust expectations for potential rate cuts, reflecting a significant slowdown in the US economy.