Japanese stocks fall sharply on weak US jobs data, yen gains

   By Kosaku Narioka

Japanese shares fell sharply again as disappointingly weak U.S. jobs data raised concerns about the world’s largest economy and the yen strengthened.

The Nikkei Stock Average fell 6.2% to 33,691.16 on Monday morning, following Friday’s 5.8% loss, which was its biggest 1-percentage-point drop since the Covid-19 pandemic began in March 2020. The index briefly fell 7.1% on Monday, wiping out all of its gains so far in 2024 and falling 21% from its last high close.

Other Asian stock indexes also fell, with South Korea’s Kospi index down 4.3%.

U.S. job growth slowed sharply in July, with the unemployment rate rising to its highest level in 2021, the U.S. Labor Department said Friday. The yen strengthened against the dollar as a result.

The yen was trading at around 145.25 to the dollar in Tokyo on Monday, down from 148.95 at the Tokyo Stock Exchange’s close on Friday and around 161 in early July, a 37-year low.

Many analysts expect the Federal Reserve to cut interest rates at each of its three remaining meetings this year. A handful of economists said Friday that the Federal Reserve will need to move faster if it wants to improve its chances of avoiding an economic crisis.

Financial and export stocks led declines in Tokyo on Monday, with automaker Subaru Corp. down 10% and Sumitomo Mitsui Financial Group down 15%.

In general, a strengthening yen tends to reduce the profits of Japanese companies because it makes exports abroad less competitive and reduces the yen value of profits earned abroad.

Japan’s stock index hit a record high earlier this year, boosted by higher corporate profits amid a weak yen, a return to moderate inflation and improved corporate governance.

The Japanese currency has been strengthening against the dollar since early July due to the narrowing interest rate differential between Japan and the United States.

The Bank of Japan on Wednesday raised its interest rate to 0.25% from a previous range of 0% to 0.1% and signaled that further increases were likely if the economy expanded in line with the central bank’s forecasts.

Write to Kosaku Narioka at [email protected]

(END) Dow Jones Newswires

August 4, 2024, 9:51 PM ET (01:51 GMT)