Japan goes into bear market on yen strength

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Japanese shares have posted further falls after the yen reached a 10-week high against the dollar, pushing the country’s stocks into bear market territory.

The Nikkei 225 dropped 6.35 per cent in last night’s session to close at 12,445.38. The Nikkei is now down more than 20 per cent since reaching a five-and-a-half year high in May, leaving it in what is traditionally seen as a bear market.

The fall came as the Japanese currency rose to 94.06 yen against the US dollar in Asian trade. This is its highest level since 4 April and triggered concerns that the country’s exporters may face a hit to their profits.

Between November and May, the yen dropped by almost 30 per cent against the dollar following the unveiling of massive stimulus in the world’s third largest economy, leading to a jump in exporters’ profits. However, the currency has been strengthening over recent weeks.

Falls were sparked across global stockmarkets on 22 May when Ben Bernanke suggested that the US Federal Reserve could start to ease the pace of its $85bn-a-month bond-buying programme. A further hit to investor sentiment came when the Bank of Japan declined to add to its stimulus measures earlier this week.

Commons Asset Management chief executive Tetsuro Ii told Reuters: “The BoJ disappointed those who had high hopes for the great portfolio rebalancing by Japanese institutional investors, and are now rushing to close such bets.

“I think the Nikkei is close to completing such adjustments but currencies may take a bit more time given the markets’ size.”