Nikkei Index Drops Over 3% Due to "US Tapering Concerns" (Summary)

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Suhwan] The Japanese Nikkei index plunged more than 1,000 points intraday amid concerns over US interest rate hikes.

On the 21st, the Nikkei index closed at 28,010.93, down 3.29% (953.15 points) from the previous trading day in the Japanese stock market. This marked the largest drop in the past four months.

During the day, it also fell by more than 1,000 points at its lowest point.

This stock market decline is analyzed to reflect concerns about tapering (reduction of quantitative easing) as the US accelerated the timing of interest rate hikes.

According to the dot plot released after the Federal Open Market Committee (FOMC) meeting by the US Federal Reserve (Fed) on the 16th (local time), 13 out of 18 FOMC members expected interest rate hikes in 2023.

Considering that in the dot plot announced at the March FOMC meeting, 7 members expressed the possibility of rate hikes in 2023, the timing of the rate increase has been brought forward.

In particular, the FOMC warned that "if inflationary pressures increase further, interest rates could be raised as early as the second half of 2022."

As a result, the US Dow Jones Industrial Average recorded a decline for five consecutive days, falling nearly 4% over the past week.

As voices calling for tapering grow louder, there is an assessment that this has poured cold water on the Japanese economy, which is aiming for a rebound after the COVID-19 pandemic.

Takeo Kamai, an analyst at CLSA Securities, diagnosed, "Uncertainty is increasing as market views diverge regarding the US Fed's interest rate policy."

Additionally, the sharp drop in the Nikkei index on this day is also analyzed to be caused by the Japanese stock market's sensitivity to external factors and the resulting volatility.

The Nihon Keizai Shimbun reported, "The Japanese stock market reacts sensitively to sell orders from foreign investors."

Furthermore, the Nihon Keizai Shimbun also reported that concerns over Japan's low COVID-19 vaccination rate, which may delay the timing of economic recovery, influenced the stock market decline.