Japanese Stocks Slump

The Nikkei 225 surged 82% from its pandemic-selloff low to a 30-year high in February, as investors rushed into cyclical-heavy Japanese stocks amid expectations for economic reopenings. The blue-chip gauge has shed more than 8% since that peak amid concerns including the nation’s late vaccination drive and murky prospects for the Tokyo Olympics this summer.

Given the size of the declines Monday, the market will be watching in the afternoon for any possible action by the Bank of Japan to support the market. The BOJ had helped power Japanese stocks with purchases of exchange traded funds but didn’t buy any in May, its first full-month absence from the market since the program started in 2013.

The Nikkei is trading at 18.5 times 12-month forward estimated earnings, compared with its five-year average of 17 times and 20.8 times for the S&P 500.

Reference

Bloomberg, 2021-06-21, “Japanese Stocks Slump as Hawkish Fed Damps Cyclical Appeal”