'Government Watching Yen Moves Closely, Cooperating With BoJ’: Japanese Finance Minister

Japan’s Finance Minister Shun’ichi Suzuki addressed the media on Monday, in the wake of the recent stock market crash, highlighting the government’s collaborative efforts with the Bank of Japan and the Financial Services Agency to monitor market conditions with heightened urgency.

Japan's government is watching the markets with “grave concern”, Suzuki said, adding that the authorities are closely tracking exchange-rate movements, following the Nikkei stock average’s significant plunge. He outlined the importance of ensuring that foreign exchange rates move in a stable manner that accurately reflects economic fundamentals.

The Finance Minister, however, refrained from commenting on whether the current yen levels were considered excessive.

“It’s hard to say what is behind the decline in stocks,” Suzuki said, according to a Reuters report.

On Aug. 5, Japanese stocks experienced their most severe single-day decline since the 1987 Black Monday crash. The Nikkei plunged 4,451.28 points on Monday, marking its largest-ever one-day decline in point terms and surpassing the previous record of 3,836.48 points lost on Oct. 20, 1987, during the Black Monday global stock market crash, Reuters reported. The Nikkei average closed 12.4% lower, triggered by last week’s global stock market plunge, economic anxieties and concerns over unwinding investments funded by a depreciated yen, the report said.

The Topix also fell sharply, sliding 24% from a record high hit just last month, Bloomberg reported. The Topix experienced its steepest three-day decline on record, according to Bloomberg data dating back to 1959.

Tech companies and banks were the primary contributors to the Topix’s decline, the Bloomberg report added. Meanwhile, bank stocks fell following a drop of up to 20 basis points in 10-year government bond yields. Additionally, multiple circuit breakers for index futures were witnessed throughout the day.

Most analysts indicated that neither interest rate expectations nor economic data could fully account for the severity of the sell-off, Reuters reported. The sharp decline was likely influenced by the rise in the yen, which had been used as a funding currency for billions of dollars of investments due to the near-zero short-term yields and steady depreciation over the years.