Tokyo: The Nikkei average tumbled more than 11% on Thursday in its biggest one-day fall since the 1987 stock market crash after weak US economic data intensified fears that recent global financial rescue measures will not be enough to stave off a recession.
The benchmark erased a majority of the gains made on Tuesday, when it soared more than 14%, the biggest one-day gain in its 58-year history, after governments around the world pledged to support struggling banks. It is down nearly 45% so far this year.
Shares most susceptible to the health of the global economy such as Canon Inc and shipping firm Mitsui OSK Lines took a heavy beating, though Tokyo shares slid across the board.
Only two stocks including household products maker Kao Corp gained among the Nikkei 225 issues.
“The deteriorating economy is coming into the spotlight as fears over the financial system, which had been the main factor for market sell-offs up to now, are easing gradually,” said Yoshinori Nagano, chief strategist at Daiwa Asset Management.
“The sectors that reflect fears over the global economy the most are shipping firms and trading houses ... Just as financial worries started calming down after a series of measures, we’ll need steps to deal with the economy.”
Fears of a recession were stoked as monthly US retail sales showed their biggest fall in more than three years and after Federal Reserve Chairman Ben Bernanke said the US economy faced a “significant threat” from paralysed credit markets.
In Japan, a Reuters poll showed manufacturing business sentiment hit a six-year low in October, in another sign the world’s second-biggest economy is on the brink of recession.
The benchmark Nikkei shed 11.4% or 1,089.02 points to finish at 8,458.45, though it still held above 8,115.41 touched last week, which was its lowest point since May 2003.
The broader Topix index lost 9.5% to 864.52.
Wall Street had its worst day since the 1987 stock market crash on Wednesday, as bleak economic data fed worries that all the efforts to unlock credit markets may not avert a recession.
Japanese Prime Minister Taro Aso also said on Thursday that share price falls show that markets believe the US bank bailout plan may not be enough to fix the financial crisis.
“The markets are selling off stocks because investors still think the steps by U.S. authorities are not sufficient,” Aso told parliament.