Japanese stocks plunge in largest rout since 1987's Black Monday

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Japanese stocks collapsed on Monday in their biggest single day rout since the 1987 Black Monday sell-offs, driven by last week's plunge in global stock markets, economic concerns and worries investments funded by a cheap yen were being unwound.

The Nikkei share average shed a staggering 12.4% as Friday's dismal jobs data heightened worries of a possible recession, and as the yen rallied to 7-month highs versus the dollar. This was the index's worst showing in percentage terms since the October 1987 crash.

Japan's banking stocks led the rout, which pushed the Nikkei into bear market territory given its 27% drop from a July 11 peak of 42,426.77.

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From July 11 to Monday's close of 31,458.42, Nikkei has wiped out $792 billion of that peak market value.

Employees watch monitors displaying Japan's Nikkei share average, which has had a record-breaking drop in the closing price, at Nagoya Stock Exchange in Nagoya, Japan, on Aug. 5, 2024. (Kyodo/via REUTERS / Reuters)

«The rapid move in the yen is putting downward pressure on Japanese equities, but it's also driving an unwind of a major carry trade — investors had leveraged up by borrowing in yen to buy other assets, chiefly U.S. tech stocks,» said Kyle Rodda, a senior financial market analyst at Capital.com in Melbourne.

«We are basically seeing a mass deleveraging as investors sell assets to fund their losses.»

The Nikkei lost 4,451.28 points on Monday, its biggest ever one-day drop in point terms, eclipsing the 3,836.48 points it lost on