The Japanese stock market experienced the worst week in seven years. The Nikkei 225 plunged 11.1% over the week ended February 14; it is the deepest weekly slump since October 2008. Such giants as Toyota and Honda also suffered a tumble in shares of 6.5% and 4.8%, respectively. Global economic worries became one of the key reasons for such a nosedive.
Panic among investors concerns all international stock markets. The woes are caused by low GDP growth rates, a lack of action from central banks, alarm over new global recession, and negative consequences of a crude price fall. “The markets are clearly starting to price in a sharp slowdown in the world economy and even a recession in the United States. I do not expect a collapse or major financial crisis like the Lehman crisis but it will take some time before market sentiment will improve,” said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.
The fact that the tumble in oil prices aggravated Japan’s financial system surprises analysts. According to Koji Nagai, chief executive of Nomura, the slump in the Japanese stock market was mainly due to an asset sell-off in Middle Eastern SWFs. Koji Nagai says that Japanese shares were targeted by sovereign wealth funds, which have been under pressure from dropping crude prices, Financial Times reports. “Right now in the market everyone is taking a risk-off stance and there are not many buyers and that is why the stock prices keep coming down,” the Nomura head added.
