The Nikkei's Volatility: Investors' Concerns Grow

The Nikkei 225 (NKY) average fell to 1.7 percent to 13,014.58 with stocks being impacted by the slowdown in Asia’s manufacturing. Investors still continue to grow concerned after Japan’s stock market plummeted at 6.4% last week. Japanese stocks lost over 20 percent value, falling 7.3 percent on May 23. Asian shares have now reached new lows for 2013. The Nikkei’s massive volatility amounted in losses up to 20.36% since its May 22 closing high of 15,627.26.
*Thomson Reuters

Asia’s stocks fell last week with the most significant weaknesses in Japanese stocks. The dollar was trading up 0.9 percent at 96.89 yen after falling more than 2 percent to a low of 95.59 yen. The dollar hit a two-month low of 94.975 on June 7.

Japan's Government Pension Investment Fund (GPIF) stated “ It would raise its weighting of domestic stocks to 12 percent from its current 11 percent and lower its weighting of Japanese government bonds (JGBs) to 60 percent from 67 percent.” As a result, the yen will lower the cost of Japanese products sold overseas hindering competitiveness within the export market.

Japan's Prime Minister Shinzo Abe plans to double its monetary resources in efforts to higher inflation rates to 2%. He also announced at a press conference earlier this month, “We would cut allocation to domestic bonds to 60 per cent of total assets of Y112tn ($1.17tn), from 67 per cent, while boosting holdings of domestic stocks from 11 per cent to 12 per cent.”Japan’s Nikkei is now one of the most volatile stock markets in the world. Investors are questioning the measures and strategies to stabilize domestic economic growth. They are also skeptical of the country’s present aggressive efforts to boost its weakened economy. Despite concerns, Japanese officials are still supportive of the economy’s indications of recovery. The Nikkei is down about 17 percent from a 5-1/2-year high compared to last month. Overall, the Nikkei is up nearly 40 percent since November.