The benchmark Nikkei average dived to close at the lowest level in about 15 months on the Tokyo Stock Exchange on Wednesday, with the market dragged down by heavy selling traced to relentless falls in crude oil prices.
The 225-issue Nikkei was down 632.18 points, or 3.71 percent, at 16,416.19, its worst finish since Oct. 31, 2014. On Tuesday, it climbed 92.80 points.
The Topix index of all first-section issues dropped 51.44 points, or 3.70 percent, to end at 1,338.97, after rising 2.48 points the previous day.
Despite the U.S. Dow Jones industrial average’s rally on Tuesday, the Nikkei average opened moderately lower and kept falling later on Wednesday because of mounting worries over tumbling crude oil prices.
On Tuesday, key crude oil futures on the New York Mercantile Exchange fell 96 cents to settle at $28.46 per barrel, the lowest level in 12 years and four months. In off-hours trading later, the oil futures prices slipped below 28 dollars.
In late Wednesday trading, the Nikkei average saw its loss briefly expand to over 650 points. The Tokyo market was driven down by index futures-led selling amid poor performances of other Asian stocks, including Chinese shares, brokers said.
Hedge funds in oil-producing countries stepped up selling of Tokyo stocks to lock in profits amid growing uncertainty over the oil market, they added.
“Market players were unable to find any positive news,” said Chihiro Ota, general manager for investment research and investor services at SMBC Nikko Securities Inc. Other Asian stock markets were all weak on Wednesday, Ota also said.
Investor sentiment cooled after the International Monetary Fund on Tuesday revised down its projection on global economic growth for 2016 by 0.2 percentage point to 3.4 percent, partly due to uncertainties about emerging economies, brokers said.
In addition, Tokyo stocks fell prey to the dollar’s decline below ¥117, market sources said.
“It doesn’t seem at all that the market will hit bottom any time soon,” an official of a major brokerage house said.
The Nikkei average has now fallen to the levels when the Bank of Japan expanded its “quantitative and qualitative” monetary easing policy a year and three months ago.
Given the recent market turbulence, “the possibility of the BOJ taking additional easing steps at its policy-setting meeting next week is not zero,” SMBC Nikko’s Ota said.
Falling issues overwhelmed rising ones 1,886 to 40 on the TSE’s first section, while nine issues were unchanged.
Volume increased to 2.57 billion shares from Tuesday’s 2.17 billion shares.
All 33 sector subindexes on the first section closed lower.
Resources-related issues posted hefty losses on the crude oil price downtrend. Among them were trading houses Mitsubishi and Mitsui, and oil wholesalers Showa Shell and JX Holdings.
The stronger yen battered tech heavyweights Sony, Hitachi and Canon, and automakers Toyota, Honda and Mazda.
A handful of winners included household products maker Kao, mayonnaise maker Kewpie, beverage producer Dydo Drinco and semiconductor maker Renesas Electronics.
In index futures trading on the Osaka Exchange, the key March contract on the Nikkei average dived 740 points to 16,320.