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The recovery was largely attributed to a speech delivered by Bank of Japan (BOJ) Deputy Governor Shinichi Uchida, who assured investors that the central bank would maintain its ultra-loose monetary policy.
The rally followed robust U.S. retail sales figures, which increased by 1% in July, reversing a revised 0.2% drop in June.
Historical patterns suggest that after periods of yen-buying interventions, the BOJ has occasionally turned to yen-selling interventions to counteract excessive appreciation. Nomura, Japan’s largest brokerage, recently highlighted this possibility, noting that while it isn’t yet their primary scenario, future Ministry of Finance (MOF) interventions to curb yen strength could be on the table.
The Nikkei closed the day at 38,062.67, marking a 3.6% increase and its second-largest daily gain of the year. The broader Topix index also saw a notable rise, finishing approximately 3% higher at 2,678.60. For the week, the Nikkei enjoyed a remarkable gain of over 8%, its strongest weekly performance since April 2020. This upturn was fueled by a combination of easing recession fears in the U.S., a halt in the yen’s rapid appreciation, and signs of improved economic growth in Japan.
The Nikkei's dramatic fall follows a significant decline in U.S. stock markets and a broader downturn in major European indexes. The negative sentiment has spread across global markets, affecting South Korea, Taiwan, and Australia as well.
Bangladesh and Japan are initiating discussions on an economic partnership agreement (EPA) focusing on tariff negotiations and fostering trade relations between both the countries.
The rapid run-up has sparked concerns about overheating. Technical indicators suggest the market is overbought, and a correction could be on the cards.
Asian markets face turbulence as China's economic challenges and speculation over potential rate cuts contribute to a slide in stocks, leaving investors on edge amid a volatile landscape.
The cautious mood was further emphasized by the absence of trading in the United States due to a national holiday. However, Japan's Nikkei bucked the trend, extending its rally to reach a fresh 34-year high.
The world's second-largest economy, facing declining exports for the first time in seven years, cast a shadow over its neighbors, despite pockets of resilience like Japan's record-breaking rally.
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