The Nikkei 225 index of leading stocks in Tokyo lost a staggering 4,451 points, its biggest drop in history. The index closed more than 12% down, taking its losses since early July to 25% and entering bear market territory. “That was a crash. It smelled like 1987,” Neil Newman, head of strategy at Astris Advisory in Tokyo, told CNN. He was referring to “Black Monday” in October 1987, when global markets plunged and the Nikkei lost 3,836 points.
Traders expect more rate hikes to come later this year as the central bank tries to contain inflation. The Nikkei closed down 5.8% Friday, as traders fretted about the impact of a stronger yen on Japanese companies. A rising yen would hurt exporters and companies with overseas earnings. A rapid appreciation in the Japanese currency has also forced many market participants to unwind the yen carry trade, a hugely popular trading strategy.
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