TOKYO – Tokyo stocks plummeted on Tuesday, dropping the benchmark Nikkei Stock Average to more than 1,000 points to its lowest level in 20 months, as the chaos of US policy raises investor concerns about the health of the global economy.
Other Asian markets, which were open on Christmas day, also hit sales, but losses were more modest. Shanghai Composite Index fell 0.9%, while Taiwan's Taiex Index closed 1
The Nikkei ended the day at 19,155.74, down 1,010.45 or 5.0%, ending lower in its fifth consecutive session. It was the index's first close since September 15, below the important 20,000 mark.
The Japanese financial markets were closed on Monday for a national holiday.
The relative resilience of Tokyo stocks made them more vulnerable to selling than Chinese stocks this year. said Mutsumi Kagawa, chief strategist at Rakuten Securities. The signs that Beijing is joining Washington's claims on intellectual property issues have also raised hopes of easing trade tensions and supporting Chinese and Taiwanese stocks, Kagawa added.
Investors rushed to the safety of Japanese government bonds, pushing the 10-year yield to 0%, the lowest since September 2017, down from 0.04% on late Friday.
Markets in Hong Kong, South Korea and much of the Southeast Asia was closed Tuesday for the Christmas holidays, along with markets in Europe and the US.
The immediate trigger for the selloff was the confusion of US policy in the wake of the partial closure of the government over the deadlock of the federal budget and repeated attacks by US President Donald Trump on central bank policy of monetary normalization. The chaos gave investors more reason to exit risky assets as they faced a weak global economy.
"The sell-off in stock markets reflects growing concerns among investors about the global economy," said Norihiro Fujito, investment strategist at Mitsubishi UFJ Morgan Stanley Securities. The US economy may look strong now, but next year it will be overtaken by a weakening global economy.
The trade war between the US and China has slowed growth in China, which in turn has impacted economic growth on which the economy is dependent. It is like Germany's and the emerging Southeast Asian economies.
Trump raised US political uncertainty by tweeting on Monday: "The only problem our economy has is the Fed," a new attack on US Federal Reserve monetary policy tightening. Fears over the independence of the US central bank and the role of the dollar as a world currency trigger.
US Treasury Secretary Steve Mnuchin unsettled markets after announcing on Monday that he had called on the CEOs of the six largest US banks to secure access to liquidity. The announcement failed to arouse the suspicion that there is a problem with the US banking sector instead.
Economist and Nobel Prize winner Paul Krugman tweeted on Monday, "That's amazing, it's as if Mnuchin wanted to create a panic about anyone." the market will continue to advance.
"Weaker stock prices and a higher yen are likely to affect the business climate," warned Chief Strategist Shigeki Sakaki of Nomura Asset Management Co Sakaki pointed to a potential weakness of Japanese trading companies in the face of global economic slowdown and weaker commodity prices. "The Nikkei is recovering to the level of 20,000, if that happens, it will not be sustainable," as companies' deteriorating fundamentals reduce the attractiveness of equities, he added.
Overnight in New York, the Dow Jones Industrial Average lost 653.17 points, or 2.9, the low since September 2017.
The risk-averse climate has triggered the purchase of the yen, which is the Japanese currency against the dollar Four-month high of 110.5 in the morning had brought to 110.5. The yen tends to appreciate as markets depend on the expectation that Japanese investors will reduce the risk of risky assets and repatriate money.
At noon in Tokyo, the dollar was trading at 110.13-15 yen, compared to 111.28-29 late Friday.