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This move comes in response to significant trading activity, where certain ETFs and ETNs frequently hit their price ceilings, causing trading halts and limiting market flexibility. Among the affected products are high-profile instruments like the TOPIX Bull 2x ETF and the Nikkei 225 Double Inverse Index ETF.
JPX’s review of the TOPIX index began earlier in 2024 through a series of consultations aimed at improving its accuracy and functionality. One of the central goals of these revisions is to address liquidity concerns, ensuring that the index only includes stocks that are actively traded.
On September 16, while the Japanese market was closed, the yen briefly surpassed the 140 yen mark, hitting 139.58 per dollar. This surge was driven by speculation that the Federal Open Market Committee (FOMC) would implement a 50 basis point interest rate cut, double the usual amount. Meanwhile, expectations are that the Bank of Japan (BOJ) may reinforce its stance on monetary easing at its upcoming meeting on September 19-20, should its economic outlook persist.
The yen’s strength intensified as the US Federal Reserve is anticipated to announce a 0.5% rate cut at the ongoing Federal Open Market Committee (FOMC) meeting. This expected reduction would narrow the interest rate differential between Japan and the US, pushing the yen to a high of 139 per dollar—its strongest level in over a year. Although the yen has recently settled in the high 140s per dollar, the threat of further appreciation remains, prompting heavy selling of export-driven stocks like Toyota. The impact of a stronger yen is feared to erode profitability for exporters, exacerbating market volatility.
During the second week, the yen appreciated amid expectations of a domestic interest rate hike, which led to a decline in Japanese stocks. The Tokyo Stock Price Index (TOPIX) fell by 1% over the week. Market participants are expected to remain cautious in the first half of the third week as they monitor currency fluctuations.
The yen's temporary rise to the 140 yen range against the dollar exacerbated the sell-off, particularly impacting export stocks. The market was further pressured by perceptions from a U.S. presidential debate, where Democratic candidate Kamala Harris was viewed as having an edge over Republican incumbent Donald Trump. The speculation that Trump might lose, potentially affecting his promise of lower corporate tax rates, fueled concerns and led to increased selling by overseas speculators.
The Nikkei Stock Average and the Tokyo Stock Price Index (TOPIX) both recorded their largest declines since August 5, a day marked by significant global market volatility. This latest selloff was precipitated by the Institute for Supply Management’s (ISM) report on August’s manufacturing activity, which revealed a contraction for the fifth consecutive month, falling short of market expectations. Particularly hard-hit were technology stocks in the U.S., including Nvidia, which saw its shares plummet, erasing $278.9 billion in market value—an unprecedented drop for a single U.S. stock.
The Nikkei 225, a key benchmark of Japan’s stock market, closed marginally lower, reflecting investor caution amid ongoing concerns over global economic conditions and sector-specific challenges. Semiconductor stocks, which have been a major focus for investors due to their pivotal role in the global supply chain, were notably weaker. The sector's decline was attributed to a combination of factors, including persistent supply chain issues and reduced demand forecasts, which have led to a sell-off in related stocks.
The Tokyo Stock Price Index (Topix) hit a record high as Japan’s banking and automotive sectors experienced significant gains, reflecting robust economic growth and investor optimism in key industries.