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Nikkei Plunges 420 Points, Topix Tumbles 3%, Most Since March

Define irony. Literally hours after financial entertainment outlet CNBC wrote an article in which it said that "As fourth quarter kicks off, there's one market in Asia that has investors excited: Japan" the Nikkei crashed.

First, some more humor from CNBC, which quotes JPM who apparently does not realize that crushing your currency to generate nominal gains is a zero sum game, and instead of pitching Japan as the next big thing, he should be focusing on the "upside" in Venezuela or Argentina:

The world's third largest economy may be struggling to shake off the drag from the sales tax hike that took effect in April, but a weakening yen, improving corporate profits and attractive valuations will likely power gains in equities in the coming months, say strategists.

 

"We are going to get a combination of value meeting growth – the Japanese market is cheap – so there's value, and on top of that we are going to get earnings growth," said Jesper Koll, head of Japanese equity research at JP Morgan Securities Japan. "

 

Koll's optimism was shared by several other strategists.

 

"We're overweight Japan. Abenomics is making progress, albeit slowly, the yen continues to weaken, which is good for stocks, and pension fund reform is a huge potential catalyst," said Simon Grose-Hodge, head of investment advisory, South Asia at LGT Bank.

So yes, entertainment that is free and funny: a great combination.

In the meantime, someone in Japan finally read Zero Hedge articles from early 2013 which were warning about precisely the kind of hyperstagflation that Japan is currently experiencing. That someone happens to be the former finance minister Hirohisa Fujii who in an interview yesterday, said that further falls in the yen may lead to market intervention.

You read that correct: not yen increases, falls! Which, coming just as the USDJPY touched 110 before plunging nearly 150 pips overnight, appears to have been heard loud and clear.

Some of his other comments, which repeat everything we have said from Abenomics' Day1:

  • BOJ’s policy of monetary easing leading to weak yen is mistaken
  • Weaker yen hurts general public through high prices for imported food and fuel
  • Delaying sales-tax rise would lead to a collapse in JGB market, rise in interest rates

Ironic how all these people wait until they are "former" this and that before telling the truth.

Perhaps it was these comments that forced Sumitomo Mitsui to admit that the USD/JPY is entering a correction phase this month, says Shinji Kureda, head of FX trading, and as a result it could decline to 108.26, the low on Sept. 23 and possibly even 107.39, the high on September. Or far, far lower once the failure of Abenomics is finally filtered through the skulls of the fat fingering momos that make up the Japanese market.

And since the Nikkei stock market is nothing but a derivative of the Yen, what happened overnight puts the CNBC article above in a further amusing light because as of a few hours ago the Nikkei closed, plunging by more than 420 points, or down 2.6%, the biggest drop in months, with the Topix crashing as much as 3%, the most since March 14, on volume that was 26% above the average, and wiping out all of September's gains in one session.

Something else those who acted on the CNBC article did not anticipate: all 33 industry groups down, led by real estate and glass/ceramics. The biggest decliners Tokuyama -7.1%, Nippon Electric Glass -5.7%, Suzuki -5.7%.

And now we sit back and await news of another half a trillion plus fat finger as the Bank of Japan desperately struggles to preserve confidence in a crashing economy and market.