A stock market crash in Japan sent the U.S. stock market down hard this morning.
Japan’s Nikkei 225 index fell over 12% in Monday trading, wiping out its gains for the year. The market there fell as the value of the yen rose.
The Japanese currency was trading at 142 to the U.S. dollar as Wall Street opened today. One month ago, it was at 160.
Japan’s Currency Troubles
The higher yen will make Japanese exports more expensive. Analysts believe Japan’s government has been buying yen to support the currency’s value and that trade may be unwinding. Toyota Motor (NYSE:TM) stock fell 7.5% early this morning to $160 per share. The stock ended July at over $190 per share.
Analysts worry that the Japanese market is now a “falling knife” and are warning investors away. But the same may be true of the U.S. market, where the Dow Jones opened down 1,000 points and the Nasdaq fell 6%.
The Volatility Index, known as the VIX, doubled over the weekend, from 23 to 55. The last time it was this high was at the start of the Covid-19 pandemic when it hit a high of 66.
There were already warning signs from Japan before the weekend selloff. A survey showed workers budgeting less for their summer break, worried about inflation and the weak yen. Over one-third said they planned to spend the break at home.
The rising yen and falling stock market also hit cryptocurrency. The price of Bitcoin (BTC-USD) against the yen fell 15% over the weekend and almost 12% against the dollar. At its low, Bitcoin was below $50,000, but it bounced back in early morning trade.
Japan Stock Market Crash: What Happens Next?
Minutes of the Bank of Japan show it was worried about inflation and tilting toward hawkishness back in June, well before the present volatility began.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in TM.
