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Japanese Stocks Tumble 6% as Long-Running Surge Falters

A more-than-year-long rally in Japanese stocks, driven by the country’s depreciated currency, hit a wall at the end of the week.

Japan’s Topix index, which includes companies that represent a broad swath of the Japanese economy, fell 6.1 percent, extending losses from the previous day. It was the index’s worst two-day performance since the 2011 earthquake and tsunami. The Nikkei 225 index fell 5.8 percent on Friday.

Analysts noted a “state of panic” in Japanese markets following the Bank of Japan’s decision on Wednesday to raise interest rates for only the second time since 2007. Sentiment worsened on Friday over concerns about the health of the economy and the tech industry in the United States.

The central bank had raised its key rate to a quarter point, up from a range of zero to 0.1 percent. The move bolstered Japan’s currency, the yen, which was trading at approximately 149 to the dollar on Friday, a significant recovery from 154 at the start of the week.

A weaker yen had been good for Japan’s major exporters, inflating their earnings and making Japanese products more competitive globally. Policies including rock-bottom interest rates that kept the yen weak were long a cornerstone of Japanese economic policy.

This dynamic of a weaker yen and rising corporate profits reached a peak in recent years as the yen fell to near four-decade lows against the dollar. Companies like Toyota reported some of the largest profits in Japanese history, attracting investors and sending Japanese indexes to a series of record highs.

Now some economists suggest the trend is reversing.

“It can be understood that the bubble of a weak yen and high stock prices created by the Bank of Japan has entered the process of collapsing,” Takahide

Read more on nytimes.com