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CARNAGE IN JAPAN: Nikkei's largest fall in years -- yen spikes -- government bond yields below 0%

Photo: Chris McGrath/Getty Images

It’s been a tumultuous, nerve-jangling session for Japanese markets.

The benchmark Nikkei 225 index lost in excess of 900 points, closing the session at 16,085.44. The 5.4% decline is the largest since June 13, 2013, and left the index sitting precariously above the 16-month low of 16,017.26 struck on January 21.

Since the January 29 high, the day the Bank of Japan adopted a zero interest rate policy, the index has now lost more than 10%.

Like markets in Europe and the US, financials led the losses with a decline of 7%.

All other sectors finished in the red, with utilities, down just 2.63%, the standout performer for the session.

Yes, not much to write home about on what was a savage market sell off.

While concerns over the outlook for the global economy contributed to the decline, renewed strength in the Japanese yen – coming despite additional easing from the Bank of Japan less than two weeks ago – was also a major factor behind the Nikkei’s decline.

The USD/JPY briefly hit a low of 114.25 midway through the session, marking the strongest level the yen has been against the US dollar since November 2014.

In late trade it currently buys 114.72, down 1% from the New York close.

While continued Bank of Japan monetary policy easing has done little weaken the yen, it has certainly impacted Japan’s government bond market.

The easing, along with renewed global growth fears, saw yields on benchmark 10-year Japanese government debt fall below 0%, taking them to lows never witnessed before.

So to recap: stocks slumped by over 5%, recording their largest decline in nearly three years, the yen hit a five 15-month high while benchmark JGB yields fell to the lowest level on record.

Another amazing session, and one that sets up an interesting open for European markets pummelled in a similar fashion on Monday.

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