That’s reflected in the markets. Japanese Finance Minister Taro Aso warned the yen’s rise was “rough”, something of an understatement as the Nikkei nosedived 5.4 percent.
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Wall Street has confounded predictions, with US stock markets rising slightly after a weak opening.
The dollar index eased 0.1 percent to 95.939, not far from a 3-1/2-month low of 95.663 set on Tuesday. Stocks are coming off a two-day losing streak.
Confidence in the global economy remains “strikingly low”, according to FXTM research analyst Lukman Otunuga.
In Europe, stocks managed to eke out gains on the open before succumbing to another bout of selling. The S&P/NZX 50 Index in Wellington lost 1.3 percent in its first day of trading this week.
Such concerns have also seen one market measure of long-term euro zone inflation expectations fall to a record low. US crude was up 2.1 percent at $28.53 a barrel. Most investors regard a 20 percent retreat from a peak as the definition of a bear market. Materials and health care stocks were among the biggest gainers, while energy stocks fell the most following another steep slump in crude oil prices. The Nasdaq composite added six points, or 0.1 percent, to 4,289.
Treasuries are off to their best start to a year since 1988 amid demand for safe investments, and gold is near a seven-month high.
The Bank of Japan’s new policy is meant to stimulate the economy, which narrowly avoided falling into recession last quarter.
In Asia, Japan’s Nikkei 225 dived 5.4 per cent to close at 16,085.44 and Australia’s S&P/ASX 200 fell 2.9 per cent to 4,832.10. Banks tumbled in Tokyo after Deutsche Bank AG shares and debt slumped Monday amid questions over the lender’s ability to pay coupons on its riskiest bonds.
In doing so, Japan joins a handful of European countries that have also lowered rates below zero.
The Topix index sank 5.5% on Tuesday, posting its largest decline since August, to 1,304.33.
Flight-to-quality bids to the yen, meanwhile, are raising concerns about Japanese corporate earnings.
Many market players, including Matsui, think foreign investors will likely continue selling but that would be cushioned by buying from local participants, including the BOJ and public pension funds.
“This is interesting considering Australian banks are not as exposed to liquidity issues as their US and European counterparts”, said Lucas. The dollar was down at 115.25 yen from 115.58 yen.
Not all financial assets are suffering during this tumultuous start to 2016.
The gains were stronger on the continent after eurozone bank stocks, which have taken a hammering on capital shortfall concerns, recovered some ground.
Precious metals prices were mixed. After sharp drops this week, shares in banks were picking up Wednesday, with Deutsche Bank up 11 percent. However, Italy’s UniCredit was down again as fears over the scale of bad loans in the country’s banking sector remain.
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“At the moment, the euro has a very high inverse correlation with risk assets”, said Kadota at Barclays. National Australia Bank dropped 4.8 per cent in Sydney and Mizuho Financial slid 6.2 per cent in Tokyo. Leisure goods maker Sony (SNE) fell by 2.4% on February 8, 2016. The index hasn’t been that high since July 2013, based on CMA data. At the current exchange rate, that 136 mark would correspond to about 15,600 in the Nikkei, its lowest level since October 2014 and a little more than 100 points below Wednesday’s close of 15,713.39.
