Friday’s share-price rout in Japan continued with a vengeance on Monday and set the tone for markets globally, with U.S. indexes trading overnight and cryptocurrencies moving down in line with the 225-issue Nikkei average.

The yen staged an energetic rally, maintaining a trend ongoing for weeks, and is now trading at levels not seen since early 2024. Yields collapsed in Japan, with the benchmark 10-year government bond dropping like a rock and now well below 1%.

At the close Monday, the benchmark index was down 4,451.28 points, or 12.40%, to 31,458.42.

According to Nikkei data, it is the largest point fall ever, eclipsing the decline on Oct. 20,1987, the day after Black Monday in New York. It is the second largest decline in percentage terms.

Most traders say that the turmoil has to do with the Bank of Japan’s surprise rate increase last week and the resulting strengthening of the yen, which makes it harder for Japanese companies to sell products overseas, and threatens Japan's incipient and fragile economic recovery.

They also link it to the slowing economy in the United States and the fall of New York-traded tech shares.

For some, it’s becoming increasingly obvious that what’s happening is linked to the ending of the carry trade, in which investors borrow in cheap yen to invest in higher yielding currencies.

“Over recent months, this strategy has hit a brick wall,” wrote Chris Turner, head of foreign exchange strategy, and Dmitry Dolgin, chief economist, at ING.

Japanese stocks are now in a bear market, which is generally described as a 20% drop from the peak.

Drops were across the board and in almost every sector. Nomura was down 19%, Resona Holdings 20%, Mizuho Financial 20%, Mitsui 20%, Honda 18% and Hitachi 13%.

SoftBank Group declined 19%.

On Friday, the Nikkei ended the day down 5.81%.

“The sudden reversal in yen, driven both by a drop in U.S. yields and the BOJ’s hawkish stance prevailed in its July meeting, is another idiosyncratic factor for Japanese equity,” said Norihiro Yamaguchi, a senior Japan economist at Oxford Economics.

“Though domestic fundamentals haven’t changed a lot since a few weeks ago, Japan’s equity market is unlikely to reverse soon, at least until the U.S. market calms,” Yamaguchi said.

Chief Cabinet Secretary Yoshimasa Hayashi said the government will continue to closely watch the market movements with a sense of urgency.

Due to the BOJ’s surprise rate increase and anticipated rate cuts by the U.S. Federal Reserve, UBS Securities on Monday released a fresh forecast for the Nikkei, envisioning 39,000 by year-end, down from an earlier forecast of 42,000.

“I’d be far less bearish there than I am bullish yen. In other words, the Nikkei should not fall as much as the yen might rally. Nikkei should steady itself soon, but the yen should just keep on rallying,” said Gareth Berry, foreign exchange and rates strategist at the Macquarie Group.

The 10-year Japanese government bond was yielding 0.775%, down from 1.07% last week. The yen was trading against the dollar at about ¥143, down from almost ¥162 just weeks earlier.

In overnight trading on Monday in Tokyo, the Nasdaq 100 was down almost 5%, while the S&P 500 was down about 2.5%. Bitcoin was down about 10%.