CARNAGE IN JAPAN: The Nikkei is still crashing

Photo by Chris McGrath/Getty Images

Resuming trade after a long weekend, Japanese stocks were crushed on Monday, tumbling more than 3% following an equally ugly decline on Thursday.

The benchmark Nikkei 225 finished the session down 3.11% at 16147.4, the lowest closing level seen since April 12.

From the high of Thursday’s session — 17,572.3 — the index has now fallen by an amazing 8.1%.

Putting that another way, in just one and a half sessions of trade, it’s nearly hit levels deemed to be a technical correction.

Nikkei 225 Daily Chart.

The significant losses followed the shock decision from the Bank of Japan last week to keep monetary policy settings unchanged in April, something that was seen as unlikely by most in financial markets.

“We’ve started the week with a precipitous drop in Japanese equity as the market responds to the strength of the yen,” co-managing director at Tyton Capital Advisors Martin King told Reuters.

“The Bank of Japan’s decision last week not to extend easing polarized the market and at the moment the voice of the bears is louder. Many will be asking what can be done to depreciate Japan’s currency this time as the BOJ has already come close to exhausting its tool-kit.”

In reaction to the news, the Japanese yen staged its largest one-day percentage rally seen since March 2011 on Thursday, a move that has continued today following news that the US Treasury has placed Japan on a new currency monitoring list, along with four other countries, that have large trade surpluses with the United States.

According to Reuters, the report could make it harder for Japan to intervene in currency markets to stem the yen’s gains.

In response to the report, along with the continued fallout of the BOJ’s decision, the USD/JPY fell as low as 106.17 in early Asian trade on Monday, the lowest level seen in 18 months.

It currently buys 106.52, up 0.16% for the session.

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