Japanese stocks took a significant hit on Monday following the release of weaker-than-expected U.S. jobs data on Friday. The latest U.S. jobs report showed that nonfarm payrolls increased by just 120,000 in July, well below the market expectations of 200,000. This news had a ripple effect on the global economic outlook, causing Japan’s benchmark Nikkei 225 to drop by over 12 percent, marking the biggest drop for the index since 1987.
Japan, with its export-heavy economy, is particularly vulnerable to changes like these. The country heavily relies on exports, making its market extremely sensitive to economic conditions in America, one of its biggest customers. In response to the disappointing job data, investors moved money away from equities and into safer assets like government bonds. The yen also strengthened against the dollar, which has mixed implications for Japan – reducing the cost of imports but also diminishing the profitability of Japanese companies that export goods abroad.
Large exporters like Toyota and Sony, key players in the Japanese economy, saw their shares decline by 3.5 percent and four percent, respectively. Japanese Finance Minister Shunichi Suzuki expressed „grave concern“ over the market decline, stating that it’s hard to pinpoint the exact cause behind the stock drop.
The impact of the U.S. jobs data was not limited to Japan. Other markets across Asia were also affected, with South Korea’s Kospi index dropping over nine percent and Taiwan’s Taiex exchange falling by 8.4 percent. Additionally, markets in Singapore, Indonesia, and Thailand all experienced declines of around two to three percent.
When the U.K. markets opened on Monday, a similar trend was observed. The FTSE 100 suffered its largest drop in over a year, opening down 159.05 points. U.S. stock futures also fell significantly ahead of the market open, with the Dow Jones Industrial Average down by over 600 points and S&P 500 Futures dropping 140 points.
The VIX, an index measuring market volatility, was up about 26 percent as of early Monday, indicating heightened market uncertainty. The job figures from Friday raised concerns about a potential recession in the U.S., prompting anxieties among investors and analysts.
Despite the concerns, the U.S. economy is currently growing at a moderate pace. In the second quarter of 2024, real Gross Domestic Product (GDP) increased at an annual rate of 2.8 percent, following a 1.4 percent growth rate in the first quarter.
The sudden and sharp reaction to the U.S. jobs data underscores the current volatility and anxiety in global markets. Analysts are closely monitoring the situation to see how markets will respond in the coming days.