Nikkei Index Declines to Lowest Point in Eight Months Amid U.S. Tariff Fears

The Nikkei stock index experienced a significant decline on Thursday, closing down nearly 3 percent and reaching an eight-month low. This drop is attributed to rising concerns about a global economic slowdown following the announcement of reciprocal tariffs by U.S. President Donald Trump.

In Tokyo, the U.S. dollar briefly fell to a three-week low against the yen, trading in the upper 146 yen range as investors sought the yen as a safe-haven asset. The announcement of U.S. tariffs has heightened anxiety regarding the economic outlook, leading to a shift in investor sentiment.

The 225-issue Nikkei Stock Average fell by 989.94 points, or 2.77 percent, closing at 34,735.93--its lowest closing figure since August 6. At one point during the trading session, the index had dipped more than 4 percent. The broader Topix index also experienced a downturn, finishing at 2,568.61, down 81.68 points or 3.08 percent.

Most sectors on the Prime Market ended lower, particularly in banking, marine transportation, and securities. At the close of trading, the dollar was valued at 147.24-27 yen, a notable decline from 149.30-40 yen in New York and 149.65-67 yen in Tokyo just a day earlier. The dollar had traded as low as 146.83 yen during the day.

The euro was quoted at $1.0970-0972 and 161.54-58 yen, compared to $1.0843-0853 and 162.10-20 yen in New York, as well as $1.0791-0792 and 161.49-53 yen in Tokyo late Wednesday afternoon.

The yield on the benchmark 10-year Japanese government bond concluded at 1.345 percent, reflecting a drop of 0.125 percentage points from the previous day. It briefly fell to 1.325 percent, marking the lowest yield since late February, as investors moved away from riskier assets in response to the evolving financial landscape.

A prevailing risk-averse sentiment has taken hold in financial markets, with many investors opting to sell stocks amid increasing fears about the potential negative effects of U.S. tariffs on both the Japanese economy and the global economy, including the United States.

The announced reciprocal tariff rate of 24 percent on Japanese goods was unexpected, as analysts had anticipated rates between 10 and 20 percent. This has raised alarms about further economic implications, according to experts in the field.

Bank shares faced significant selling pressure following a notable decline in long-term interest rates, which has led to speculation that the Bank of Japan may encounter challenges in tightening its monetary policy in the near future.

Despite the significant losses observed in Tokyo's stock market, some investors have begun to temper their selling in anticipation that there may be opportunities for negotiations regarding tariff levels with the United States. However, uncertainty remains regarding whether such discussions could satisfy President Trump's administration and ultimately lead to reduced tariff rates.