Fear Hits Japanese Banks, Nikkei Plunges, 10-Year Yield Negative for First Time Ever
While China, Hong Kong, and some other Asian markets celebrated the lunar New Year and wisely kept their markets closed, all heck is breaking loose in Japan.
The Nikkei had risen 1% on Monday and was down “only” 18.8% from its recent high in June 2015, thus dodging not only the rout of most other markets that day but also the ignominious fate of being pushed, like so many other markets, below the blue line in my infamous Global Bear-Market Progress Report. The blue line indicates a decline of 20% or more. But that was like so yesterday.
Today, the Nikkei plunged 919 points or 5.4%. It’s now down 23.1% from its recent high, in a solid bear market. Fears about global growth coagulated with fears about a banking crisis radiating out from Europe, and particularly its epicenter, Deutsche Bank.
So Japan’s four systemically important megabanks that will not be allowed to implode if at all possible got totally smoked today, and have gotten crushed since their highs last year:
- Mitsubishi UFJ Financial Group plunged 8.7%, down 47% from June 2015.
- Mizuho Financial Group plunged 6.2%, down 38% since June 2015.
- Sumitomo Mitsui plunged 6.2%, down 26% since May 2015
- Nomura plunged a juicy 9.1%, down 42% since June 2015
Hedge funds, particularly US hedge funds, that once had plowed into Japanese equities including the banks, hoping that Abenomics would perform miracles, have abandoned the cause. Japan’s Government Pension Investment Fund, upon the urging of the Bank of Japan, sold its mainstay investment, Japanese Government Bonds, to the Bank of Japan and loaded up with equities instead. This process is now mostly finished, and it too stopped buying equities. Other pension funds did the same. The artificial demand for stocks is dead. Now pension funds are left with stocks that have plunged.
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