Black Monday for the Japanese economy. The Nikkei Stock Average index fell sharply during the morning trading session on August 5 on the Tokyo Stock Exchange, losing 4451.28 points in a series of declines and falling 12.4 percent from the close on Friday, August 2. Such a sharp fall has not occurred in Japan since October 1987, when the Nikkei index lost 3836.48 points. Thus, trading on the Tokyo Stock Exchange continued the downward trend of 7.1% accumulated last week.

The Japanese stock market, as well as Asian markets – with Taiwan’s benchmark Taiex stock exchange index recording a decline of 8%, and South Korea’s Kospi losing more than 7% on Monday – is affected by the strengthening of the yen, as well as the worrying economic situation in the USA, which is causing analysts around the world to fear the risk of recession.

Recent signals from the US labor market are no longer so encouraging. Only 114,000 non-farm jobs were created in July, less than analysts’ forecast of 175,000 and down from 179,000 in June. The unemployment rate rose from 4.1% to 4.3%, the highest level since October 2021. Finally, there is a slowdown in wage dynamics: +3.6% annualized compared to +3.8% in June (revised +3.9%). On a month-over-month basis, wages rose 0.2%, up from +0.3% in June.

The strengthening of the yen against the dollar risks jeopardizing the profit prospects of Japanese companies, primarily export companies, which in recent months, thanks to the weakness of the national currency, have partially regained their competitiveness in foreign markets.

And on Monday, August 5, the Japanese currency recorded a series of strong rises, reaching over 155 yen against the euro and 142 yen against the dollar. The yen’s strengthening after months of weakening began last week following the decision by Japan’s central bank to raise the short-term benchmark rate by another 0.25 percent. The decision was accompanied by a statement from Japan’s Central Bank Governor Kazuo Ueda, which investors immediately interpreted as an expectation of further similar interventions by the quantitative tightening regulator in the coming months.