The Nikkei 225 has come under renewed pressure as it follow the US and European markets lower. The growing list of issues that are impacting the Japanese market are the US Fed hike cycle, the US – China trade tensions, the more recent concern about a global economic slowdown and the strong Yen that of course damages the forward profit margins of exporter stocks such as autos, electric machinery and other blue chips. The specific issue of US economic growth slowing is tied into the US tax cuts that powered the US equity market higher in 2018 but this benefit is now fading. Also, we must keep in mind that many analysts are concerned about a double punch of a weakening US economy as well as that of China. The US growth rate is expected to drop from the 4.0% level to the 1.0 to 2.0% level next year. China is expected to drop from the 6.7% GDP expansion level to 6.2% or lower by next year.
It is important to note that there are more waves of bad news. Last weekend there was a report that President Trump was thinking about removing Fed Chair Jerome Powell as the rate hike cycle (this is an independent Fed) was too fast and the economy could be derailed. President Trump has been protesting and rumors are flying around Washington that the President will engineer the Fed Chair out of office. The Treasury Head is denying this. Finally, there has been a partial government shut down and it is said that President Trump will not budge until his Wall is built.
These stories have hit Japan and note that as mentioned, the stronger Yen will also have negative impact on Japanese stocks – which were down 5.01 percent on Friday.