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once again at the beginning of the month, the japanese market suffered a "wake-up call"...

on thursday, the nikkei 225 index fell for the third consecutive trading day, widening the decline so far this month to 5%. this scene undoubtedly once again caused panic among many investors in the japanese market, as the catastrophic crash on last month's "black monday" is still lingering in many people's minds.

judging from the market trend, after yesterday's sharp drop of more than 4%, the japanese market has obviously not been able to stop the decline today. the nikkei 225 stock index, which is dominated by technology stocks, fell 1.9% at the beginning of the session. although it quickly narrowed the decline and even turned from decline to rise briefly during the session, it still fell more than 1% throughout the day. the topix index, which includes more constituent stocks, also experienced similar twists and turns.

so, is this japanese stock market crash a mini-repeat of last month's "black monday"? what are the similarities and differences between the current situation in the japanese market and the beginning of last month?

similarities and differences

judging from the background of the news, there are obviously some similarities between the two.for example, before the historic crash of japanese stocks on "black monday" on august 5, the us non-farm payrolls data for july had first ignited panic in the global market. before the sharp drop on wednesday this week, the sluggish performance of the us ism manufacturing pmi data also made the us market nervous in advance.

hiroshi namioka, chief strategist at japan's t&d asset management, pointed out that "for the japanese stock market, which has many external demand-oriented manufacturing companies and is considered to be the world's cyclical stocks, the weak results of the ism manufacturing index are likely to have a negative impact."

however, this week's decline is clearly not as serious as it was then.some industry insiders have conducted multiple comparisons and believe that the volatility and market dynamics of the japanese market this time seem to be completely different from the decline in the few days before and after the crash on august 5.

the most obvious difference can obviously be felt from the leading decline sectors.in august, financial stocks led the market decline with a double-digit percentage drop. in contrast, the decline of the leading sectors in recent days has been relatively mild, and more concentrated in stocks related to chip semiconductors and companies involved in the commodity market. they actually have more negative factors in their own industries, such as whether ai investment can realize returns and the sharp drop in commodity prices.

(the leading decliners in japanese stocks are different. the top three decliners at the beginning of last month were insurance, securities, and banks; the top three decliners at the beginning of this month were machinery manufacturing, shipping, and mining)

in terms of trading volume, the trading volume of the japanese market in the first three trading days of september also fell by about 43% compared with the same period last month.

moreover, japanese stocks have not been at the center of global market moves this month, as they were last month when the bank of japan’s hawkish stance upended currency and interest rate trading strategies.

(the decline in the dollar-denominated topix index is not significant in the global market.)

japanese retail investors were forced to sell stocks to close out bloated margin trading positions last month, a factor that amplified the market's losses at the time. but yusuke sakai, a senior trader at t&d asset management, said we are unlikely to see panic selling like before.

some things to be careful about

of course, despite the many differences, investors may still need to be wary of a further unwinding of the yen carry trade, which was one of the main culprits that led to japan's stock market crash last month.as of thursday's asian session, the usd/jpy exchange rate had fallen to around 143.30, hitting a nearly one-month low.

judging from the trends in the past two trading days, the appreciation of the japanese yen is significantly greater than that of other non-us currencies.

in addition, after the sharp drop on wednesday, japanese stocks still failed to stop bleeding on thursday, which may also be worthy of many investors to remain highly vigilant and guard against possible unknown dangers. after the sharp drop on "black monday" last month, japanese stocks actually rebounded sharply the day after "black monday".

takehiko masuzawa, head of stock trading at phillip securities, pointed out that "due to the sharp drop in the market in august, many investors have not yet recovered from their trauma and are prone to overreact. after the release of the august us non-farm payrolls data on friday, this month will also usher in major risk events such as the federal reserve's decision. the unstable market may continue."