Nikkei plunges 12.4%, logging its worst two-day decline in history

Let me remind folks here of my post April 29 about what was coming AND the reason.

I 100% nailed it on both counts.

Oh and another prediction - don’t be surprised if the BOJ completely reverses their rate rise rhetoric - can’t have the LDP’s primary donors seeing their investment portfolios getting slaughtered.

Apr. 29  01:05 pm JST

Posted in: Yen sinks to 34-year low past 160 per dollar  See in context

Bad for the world actually.

For those of you are do not get it yet, the 'yen carry trade' which has been responsible for most of the worlds liquidity for the last 30 years is about to blow up. The yen carry trade is when investors (mostly foreign) borrow trillions of yen at very low rates, and then purchase US treasuries paying a higher rate. The spread (profit) is what they then use to buy equities, real estate, anything....

This has only been possible because Japan has been in deflation the last 30 years - now it has transitioned to inflation meaning the BOJ needs to raise rates or run the risk of inflation getting out of control. This means the spread between the borrow rate in Japan vs the buy rate in the US shrinks. This means you effectively take trillions of dollars out of the global economy. What do you think has been propping up the US stock market for the last 20 years? - yen!!!

We are headed for a global recession, if not worse.

the euphoria that had taken the Nikkei to all-times highs of over 42,000 in recent weeks.

While JGovt try to promote NISA, then this is happening.

Some people still believe that Japanese economy miracle will come back, keep on dreaming.

While JGovt try to promote NISA, then this is happening

The timing is unfortunate for sure, but the idea that people should save for old age is correct. You can be the biggest socialist in the world and still believe in personal responsibility. This is as age-old as the ant and the caterpillar.

The timing is unfortunate for sure, but the idea that people should save for old age is correct.

Except there is a pension system in Japan. Now they want you to pay into it (compulsorily and you will get less than what you put in) AND do NISA, where this kind of stuff can happen to your "investment".

What a crock.

The timing is unfortunate for sure, but the idea that people should save for old age is correct.

If you have no other option than saving fiat, then yes, it's the way to go, but you are fighting a losing battle saving money in a currency that is continually getting debased through money printing.

I've googled it several times but it seems like no-one knows how big the yen carry trade is. Twitter has lots of people posting charts of the Nasdaq and usd-jpy, showing strong correlation in the last year or so, but after that all we can do is theorize.

If the carry trade is say 4 trillion USD, that's 30000 or so USD per capita for everyone in Japan. 150k for my family alone. That is way way more than we import in oil and calories. Such a massive capital outflow gives a very false picture of the Japanese economy to those willing to judge Japan on the strength of the currency alone.

What a crock.

Yes, you are exactly right - NISA in particular is specifically designed to keep you trapped in yen. The J-gov needs you to need yen to keep this whole illusion going.

Glad I sold my Nikkei index fund last month.

So in plain English, what does it means?

A lot of fancy words in the article that basically say nothing. How does this translates into Economy, living expenses for the average Tanaka, life conditions, etc..

Currency manipulation also doesn’t help.

Made a killing buying and selling with a 16 yen difference within this month alone. So thank you Japan for killing your economy even faster than predicted.

Currency manipulation also doesn’t help.

;-)

Who cares about the stock anyway. Is a game for the rich and elite anyway. They are the ones making money out of it.

The yen strengthening is the focus. Make it reach 110 again like 3 years ago and things will be great after my recent raise.

I don't there's any real reason for concern, and I don't think it will affect the economy much. Prices were getting overvalued especially considering a slowdown is now looming for US, and I'd say this is just a correction (famous last words).

Here we go again. My tin foil hat says it is by design.

This is the result of Japan trying to strengthen the yen. How the result will be the yen further weakens as the government is shoing its desperation.

Yes, you are exactly right - NISA in particular is specifically designed to keep you trapped in yen. The J-gov needs you to need yen to keep this whole illusion going.

Complete nonsense.

You can buy foreing stocks with your nisa account. Foreing stocks in foreign currency.

All markets will be selling off in the same way by the end of the year. Bubble is bursting again.

DanteKHToday  11:25 am JST

So in plain English, what does it means?

Its simple.This export oriented country have invested own taxpayers money to make value of exports lower/as prices of japanese goods are higher/this means action of BOJ have DAMAGED JP economy very badly as most of exporters will produce BIG losses,means less profits-less taxes for JPN gov-less income for jPN econmy.

at same time USA spending too much for conflicts around the world/say UA as lost case from day one/ and their army loosing in every single conflict/see recent situation at UA eastern front/.

all in all we are entering difficult part of year for many...

Its simple.This export oriented country have invested own taxpayers money to make value of exports lower/as prices of japanese goods are higher/this means action of BOJ have DAMAGED JP economy very badly as most of exporters will produce BIG losses,means less profits-less taxes for JPN gov-less income for jPN econmy.

Um, no lol. A weak yen makes Japanese goods and services CHEAPER vs. Imported goods and services and non-Japanese goods in overseas markets, thus the in-bound tourist boom.

And this uneducated criticism could perfectly substitute the PRC for the BOJ.

This really is comedy gold.

action of BOJ have DAMAGED JP economy very badly as most of exporters will produce BIG losses

As John said, you've got it backwards. A weak yen benefits exporters.

John

example

say something costs 1.500.000jpy

guy get invoice for 9.375usd at rate 160

payment received today at rate 144 1.350.000jpy

loss for jpn side is 150.000jpy

you should go back to school to say that because of rates changes jpn goods will be CHEAPER...same thing applies for tourists who have to pay more in own currency to buy same thing here locally.

this definitely not a comedy...

guy get invoice for 9.375usd at rate 160payment received today at rate 144 1.350.000jpy

That's not how export works.

Jon

Strangerland

check my lines above and THINK.

Now wake up realize the reality ... If Kamala wins the end of free world...

That's what they said when Biden won.

Instead we saw a crazy strong stock market for the past four years.

check my lines above and THINK.

I think you don't know how export works.

I think you should fact check yourself.

Because I know you're wrong.

you should go back to school to say that because of rates changes jpn goods will be CHEAPER

Cheaper vs. Foreign goods and services which will make them more in demand at a given price vs. Foreign goods and services. The price in Yen, which is the only one that matters to Japanese manufacturers and service providers does not change.

It’s one of the reasons the U.S. gets so irked at currency manipulation countries (like the PRC, cough cough).

As I went to business school, and you CLEARLY didn’t.

AND since every economist ever agrees with me, I’ll stick to economic rationality, thanks.

But by all means, keep digging. This is delicious.

10 percent loss, stop the market to prevent further losses!

John

no comment.

keep talking...

10 percent loss, stop the market to prevent further losses!

Funny how nobody calls for market stops when there is a 10% gain. Leverage can suck huh.

And Iran hasn't even launched the Israel bound missiles yet.

Complete nonsense. 

You can buy foreing stocks with your nisa account. Foreing stocks in foreign currency

Yes, and they just give you this foreign currency for free right, or might they expect you to buy it with yen?

And when you want to sell the foreign equity, guess what currency you have to convert the proceeds back into?

The dollar is back to where it was on Jan 1st 2024

For those of us traveling abroad for obon the timing couldn't be better

Mrs. Watanabe is not going to like this.

sakurasukiToday  10:55 am

While JGovt try to promote NISA, then this is happening. 

Some people still believe that Japanese economy miracle will come back, keep on dreaming.

i have to agree despite the downvotes. The Japanese government is promoting NISA and IDECO and at the very same time tried to manipulate the currency by intervening. So we went from 161ish to today’s price. Especially if they invested in US world wide funds. If they invested in the nikkei 225. They have also taken a hit. X was alight with people complaining. So no matter what happens someone will suffer. Weak yen consumers suffer, ( who are expected to save for their retirement) but a strong yen relieves consumers but hit the very same investors.( who are investing for their retirement). It seems the same yen can’t be cut into two. So you pays your money you make your choice. That very same dollar was very expensive, now those very same dollars,(if taken out today) are worth very much less. And I expect the yen to strengthen even more. Cementing those losses further. You’ll need to wait for the next cycle of weakening to any benefits of DCA. Probably another 20 years. By which time I’m flying with the angels or sunning it in the fiery hell with Lucifer.

12% down...stop the fight, referee!

I converted most of my yen to dollars in January. Converted back to yen last month. Made nearly 3 million yen doing nothing except casually checking the daily charts. Think I’ll wait until the exchange rate goes back to where it was in January 2023 before buying dollars again. It’s cyclical people and a strong yen is good for us paying our mortgages in yen.

Yen at 141.8 now. Nearly 20 down from 162 in just two weeks. Crazy amounts of action, at least "blood on the streets" if not a full on "crash".

It'll probably go lower when London opens in an hour or so.

So is the BOJ crashing the US market too?

european markets started right now.

European traders are joining the risk-off party and showing no mercy. The yen is up 3% versus the greenback while the Aussie dollar is now down about 2% versus the US currency.

we are going to have a rough ride guys...

usd some 140jpy now

lets wait for UK reaction

My father used to advise me that the safest way to double my money is to fold it in half and put it in my pocket.

So is the BOJ crashing the US market too?

Thats exactly the reason, and if you understood how the yen carry trade worked, you would understand as well, but you clearly don’t. Google it and learn a little something today.

My father used to advise me that the safest way to double my money is to fold it in half and put it in my pocket.

LOL, good one. Love it.

Thats exactly the reason, and if you understood how the yen carry trade worked, you would understand as well, but you clearly don’t. Google it and learn a little something today.

So this is crashing the GLOBAL market including the US Nasdaq?

Ummm nah.

Here's a graph showing the last four big BOJ interventions where they sold their USD reserves to support the yen. It looks like they (probably unintentionally) sold at market highs every time. This should really be framed as them making lots of money, and certainly not "using" or "spending" it. The graph suggests under Kanda, they sold 158B of Japanese owned USD for an average price of 154. They may still be idiots or dinosaurs or whatever people accuse them of being, but that now looks like one mighty fine outcome.

https://x.com/takagifx/status/1820281471523033387

Yep, let’s make a few billion yen off currency manipulation, but wipe hundreds of billions off the stock market and wiping out citizens savings. Well done BOJ!

Now I am no economist. But if Japan sold its dollars and got 161 yen for each dollar, that's great cause they got 161 yen per dollar. Now if the very same dollar today is 140 yen, they could BUY the very same dollar at the cheaper rate today, pocketing the 21 yen difference, or wait until it weakens further, then sell at the higher price. Now I'm no mathematician.....but......

That extra 21 yen difference x how many billions/trillions could be used to pay off some of that national debt. No?

I'm so glad to be a part of history...

Here is a good explanation of what is happening in real time, right now

https://x.com/adamkhootrader/status/1820314551956742240?s=46

The yen’s rally is starting to take a bit of a breather, but we could just be in the eye of the storm. It’s not even 8 a.m. in London so plenty of time for real money funds to enter the buy-yen party today if they want to.

All anyone had to do to know to get out of stocks and into cash was to watch Warren Buffet. He was dropping “perfectly good” stocks for no reason.

Now he has historical level piles of cash to buy in at half price. Amazing huh?

jpy under 140 now rockn roll continues...

Bring the yen back to 110 yen per dollar that'll be sweet !!

NISA in particular is specifically designed to keep you trapped in yen.

What planet to do you live on? Only about 5% of my NISA holdings are yen-based. Both my NISA and IDECO, which are highly diversified, are flying high despite today's NIkkei's meltdown.

What's more, today's ructions are part of the process toward monetary policy normalization between Japan and the US. The factors causing the carnage are the ones that will bring the yen back to, or close to, its former strength. And I'm happy about that.

Bring the yen back to 110 yen per dollar that'll be sweet !!

I'll have to go back and find my post from earlier this year, but I predicted that the Yen would come back to 110. Got a few laughs and insults for the prediction. A few of you regulars are going to eat some crow.

@Kumagaijin yes

I was off by a couple months, but here it is...

Posted in: Yen weakening may prove debilitating blow to Japan  See in context

The US dollar is about to TANK with countries joining BRICS and OPEC moving away from the US dollar. I think that around this time next year, we'll be seeing the Yen at around 110 to the dollar.

We are far from 110 to the dollar.

Depending on geopolitical context, and who is gonna win in November, dollar will be under pressure.

Then yen will decrease again.

It was of course too low this last year.

What is happening is same as in 2008...

Difference is demography (USA millions more inhabitants, Japan starting the slide).

So never going back to 110, and probably more like 130 at best. I have said so to my kids because they have also yen savings. Patience is key.

We are due for a correction... the U.S. will probably sell of tomorrow but I'd be willing to bet it will rebound on Tuesday. That said, the silver lining here is the Yen, it has strengthened 10% vs the USD. Much of this due to unwinding the Yen/USD Carry trade. A currency carry trade is when interest rates are very low in a certain country... like Japan. What happens is Hedge Funds from around the world borrow Yen at a low interest rate from Banks and Brokerage firms like Morgan Stanley, the hedge funds then buy mainly U.S. Dollars and then buy U.S. Treasury bonds that yield anwhere from 1 to 5% or more. The Yen loan may only cost 0.3 to 0.7%, so you borrow at the low rate, invest at a higher rate and pocket the difference. And we're talking hundreds of billions of dollars here poured into this trade. Most of these trades were orchestrated years ago when the Yen was much stronger. But with the BoJ looking to increase rates and the U.S. looking to ease rates and with the Yen so cheap, the Hedge funds can cash out and still make a massive profit. Especially if they put on these trades when the Yen was around 80 to 90 to the USD. This is the "knee jerk" reaction... so initially we'll see a big move... but it will slow down unless the BoJ makes another solid move and increases rates again.

I am bit unhappy because I did not exchange all the euros I wanted...but half of them above 170 to the euro is already not bad.

Yen is really correlated to energy price, and Japanese rate move is not the starter of rise at all but a consequence.

12,4% is a lot, some investors going to cry.

I assume if yen carries on, some will lose very big depending on the shares you have.

JeffLeeToday  05:14 pm JS

What planet to do you live on? Only about 5% of my NISA holdings are yen-based. Both my NISA and IDECO, which are highly diversified, are flying high despite today's NIkkei's meltdown

I do not know if you are a JPY-based investor (measuring the performance of your portfolio in JPY), but if you are, the performance of your portfolio of global assets is probably not better than an investment 100% in Japanese stocks considering the 14% fall of the USD/JPY (and basically same for other currencies) and the fact that foreign stock markets are also down, though not as much as Japanese stocks so far. I think we all saw a sharp fall in our portfolios regardless of our asset allocation over the past couple of weeks. There was no place to hide except JGB and JPY cash.

Of course it may not matter or be good for you if you are in the accumulating phase and have a long-term view, which you certainly have.

example

say something costs 1.500.000jpy

guy get invoice for 9.375usd at rate 160

payment received today at rate 144 1.350.000jpy

loss for jpn side is 150.000jpy

Spot the error in the comment above...

hint 1), trade is done in one currency only.

hint 2) when you got an invoice for a certain amount of money you have to pay that amount of money.

The events of the market (and of the disappointing jobs numbers last week) are certainly a concern.

My point that a weak yen helps, not hurts exports remains valid as backed up by every economic textbook ever written.

A strengthening yen is one (not the only) of the reasons for the sell-off today.

A strengthening yen is one (not the only) of the reasons for the sell-off today

You are right... I dare to say the strengthening of the Yen is even less a cause and more closely to a consecuence.

The US is no way in trouble, American spend money because they have too or want too

@nonu6976

"" can’t have the LDP’s primary donors seeing their investment portfolios getting slaughtered. ""

Spot On, wait till the phones start ringing all night long.

It took one LDP member to convince the BOJ to start raising rates, and boy oh boy what a screw up that was, but knowing how stubborn things are here it is going to take more than one LDP member to reverse course.

Yes, this is like the old days of the gbp/jpy carry trade with huge volatility. Slow ride up followed by a sharp decline as everyone rushes to buy back the yen they borrowed.

I've googled it several times but it seems like no-one knows how big the yen carry trade is. Twitter has lots of people posting charts of the Nasdaq and usd-jpy, showing strong correlation in the last year or so, but after that all we can do is theorize.

Finally, my millions waiting to pick up the pieces, the wait is almost over.

Made in the USA, The eagle has crashed . The americans are broke and they are out of money.

Wall St sell-off.

Good time to buy.

and yet, not a mention of what is probably the end of yen carry trade in the article.

@Neagari

Let's example

say something costs 1.500.000jpy

guy get invoice for 9.375usd at rate 160

payment received today at rate 144 1.350.000jpy

loss for jpn side is 150.000jpy

Spot the error in the comment above...

hint 1), trade is done in one currency only.

hint 2) when you got an invoice for a certain amount of money you have to pay that amount of money.

Sorry, you are wrong. Let's use your hints.

Hint 1: In the example the US guy bought something in Japan worth 1.5m yen and was invoiced US$9375.

Hint 2: He pays the US$9375 invoice after he has received the goods. By that time it is only worth 1.35m yen. Japanese supplier takes the loss.

This is why having USD as a reserve currency is a huge win for the US and de-dollarization is a big deal.

that's what they said when Biden won.

Well, he's not out of office yet, a sore loser will crash the economy on his exit.

He can’t crash it any worse than trump did. It was still way higher for his four years than trumps, and will end higher than trumps ended as well. And trump added more to the debt than any president ever, over double what Biden added.

Market is only down 10-12% and that is the Nasdaq. World is not ending, people.

Anyone got any recs on things to buy while they’re down?

StrangerlandToday 01:07 am JST

Anyone got any recs on things to buy while they’re down?

Nasdaq etf is always good but if you had money on the sidelines, you are a stronger person than me.

You know, once again, the markets register massive changes before even opening bell. Don't know how the small time day trader is supposed to compete with that.

if you had money on the sidelines, you are a stronger person than me.

I had a good teacher. I always have some liquidity for good opportunities.

What's your problem this time? AI works very well according to you all and surely has warned or predicted for everyone in time, long before any real losses. rofl

Anyone got any recs on things to buy while they’re down?

Apple

Apple

Reasoning?

If Japanese economy is collapsing , American investors could careless,it show the stock market is fraud,when Japanese lose money on something that has no effect on their lives, American will spend money as long as Japanese buy American government securities, American sell Security and Treasury Securities to Japan

Recent years Nikkei index that doesn't reflect Japanese actual economy such expanding poverty or stagnant real wages at all was fallen necessarily.

SendaiGirlAug. 5 09:22 pm JST

Made in the USA, The eagle has crashed . The americans are broke and they are out of money.

If you are in a G7 country, you are out of money, too...

Hopefully Japanese government and companies were able to sell the dollar and repatriate in yen while still at high

Only a fluctuation that will later rebound, but the children's brigade of anti-Japan crybabies takes advantage of the moment to suffocate their impotence and hatred against Japan..

Some people still believe that Japanese economy miracle will come back, keep on dreaming.

You keep crying, LOL..

Present LDP Kishida government neglect poverty that people facing or anxiety to the future, bring disgusting situation to people as if no option besides invest, and induced to people spend what little money to buy stock, but stock price was rapidly plunged.

Anyone got any recs on things to buy while they’re down?

Not convinced asking JT posters for investment advice is the best strategy - but each to his/her own.

VOO (low fee S&P etf)

Anyone got any recs on things to buy while they’re down?

fallaffelToday  07:40 am JST

VOO (low fee S&P etf)

You do realise VOO isn't an option in Japan?

The closest thing to that might be in the NISA system.

VOO is certainly an option in Japan, I owned that at some point myself.

You need an account in which you can trade US listed ETFs. These are available, I believe the big internet brokers all offer such.

An eMAXIS mutual fund investing in the same is pretty good too.