what happened to the japanese stock market

What happened to the Japanese stock market

As of 15 January 2026, according to Reuters and major financial outlets, Japan’s equity market experienced unusually large, rapid swings between 2024 and 2026 — a historic one‑day crash in August 2024 followed by episodic rebounds and, by January 2026, fresh record highs. This article explains what happened to the Japanese stock market, lays out a detailed timeline, reviews the principal drivers (FX, central-bank divergence, leverage and liquidity, global sentiment, domestic policy expectations), and summarizes implications and signs to watch going forward.

Quick guide: this article answers the core question "what happened to the japanese stock market" with a timeline of major moves (Aug 2024 rout → 2025 rebounds → Jan 2026 highs), explains market mechanics and drivers, and lists data and indicators investors and analysts should monitor.

Timeline of major moves (2024–2026)

Below is a chronological summary of the headline episodes that answer the question: what happened to the Japanese stock market between 2024 and early 2026.

• August 4–5, 2024 — The rout: Nikkei 225 plunged roughly 12% in one day (largest one‑day percentage / point swing in decades), TOPIX also fell sharply. Triggers: rapid yen appreciation, large unwind of yen‑funded carry positions, forced deleveraging. Circuit-breakers and trading halts were activated. Market capitalization losses were substantial across banks and tech.

• Late 2024 – Early 2025 — Volatile consolidation: prices oscillated as policy guidance from the Bank of Japan (BOJ) and global interest‑rate expectations evolved; FX volatility remained elevated.

• April 2025 — Sharp rebound: equities staged a strong rebound amid yen weakness, improved corporate earnings in exporters, and easing margin stress.

• Mid‑to‑late 2025 — Political and policy shocks: episodic moves around domestic political developments and statements about potential policy shifts (including the so‑called “Takaichi trade” rotation into certain sectors and yen expectations) drove sector rotations and intraday volatility.

• January 2026 — New record highs: Nikkei pushed to fresh highs, supported by yen weakness, solid exporter earnings, and ongoing repositioning by global and domestic investors.

Each of these episodes is examined in detail in the sections below to show what happened to the Japanese stock market and why.

August 2024 crash (largest one-day point drop since 1987)

The defining shock that frames the 2024–26 episode was the August 4–5, 2024 sell‑off. The Nikkei 225 plunged ~12% intraday on August 4, 2024 — the largest one‑day percentage and point loss in modern records for Japan. TOPIX suffered similarly large declines.

Key market outcomes during the August rout:

• Massive index move: Nikkei fell about 12% in a single trading day (August 4, 2024), erasing a large fraction of market value in hours.
• Trading halts: Circuit breakers and temporary trading suspensions were triggered to slow panic and provide time for price discovery.
• Sector concentration: Financials, technology, and some domestic cyclical names showed outsized declines — banks and brokerage stocks were hit by mark‑to‑market losses on FX positions and liquidity strains.
• Liquidity and margin stress: High volatility produced large intraday bid‑ask spreads and spikes in implied volatility; margin calls forced rapid deleveraging in some leveraged accounts.

The immediate cause was a rapid appreciation of the Japanese yen against the dollar that day and the forced unwinding of yen‑funded carry trades and cross‑asset leveraged positions. The speed of the move, combined with concentrated leverage, produced cascade effects across equity and FX markets.

2025–2026 recoveries and new highs

After the August 2024 crash, markets did not move in a straight line. There were sharp rebounds and renewed bouts of volatility driven by FX moves, policy communications, and investor positioning.

• April 2025 rebound: As the yen weakened and liquidity improved, the Nikkei staged a material recovery. Exporters benefited from currency gains; semiconductor and industrial equipment suppliers rallied on demand optimism.

• Mid‑2025 rotation: Investors rotated into sectors seen as beneficiaries of anticipated industrial policy, while banks recovered as interest‑rate expectations adjusted.

• Political event–driven peaks: Specific domestic political developments in 2025 altered expectations about fiscal and industrial policy. One popularly referenced market shorthand during this period was the “Takaichi trade,” describing a sector and currency positioning linked to a perceived policy agenda. These episodes produced strong intra‑year rebounds and sectoral leadership shifts.

• January 2026 record highs: By January 2026 the Nikkei reached new highs compared with post‑crash levels, driven by persistent yen weakness, stronger export earnings, and continued flows from international investors. The pattern of sharp sell‑offs and recoveries between 2024 and 2026 illustrates how FX and policy expectations amplified moves.

Throughout these phases, what happened to the Japanese stock market was shaped by a loop of FX moves → positioning changes → policy signaling → further flows.

Key drivers of the volatility

To understand what happened to the Japanese stock market during 2024–2026 we must look at the underlying market forces. The main drivers were:

• FX dynamics and the carry trade
• Central bank policy divergence (BOJ vs Fed)
• Leveraged positioning, margins, and liquidity
• Global risk sentiment and external macro shocks
• Domestic political events and policy expectations

Each is described below.

FX dynamics and the carry trade

FX moves were central to what happened to the Japanese stock market. For many years prior to 2024 there was a large stock of yen‑funded carry positions: investors borrowed in yen at very low rates and invested in higher‑yielding assets elsewhere (including Japanese and foreign equities, fixed income and alternative strategies). This positioning amplified capital flows and created vulnerability to sharp yen moves.

Mechanics and impact:

• Yen appreciation in August 2024 triggered immediate pain for yen‑funded positions. As the yen strengthened, the local currency value of foreign exposures fell and margin requirements rose on leveraged books. Forced selling of assets and closing of FX positions fed into equity and bond sell‑offs.
• Later, yen weakness supported exporters by boosting reported earnings and FX‑adjusted profits, which helped underpin equity rallies — particularly in exporters and industrials.
• The carry trade created an asymmetric risk profile: prolonged gains as carry collected small interest differentials, but sudden large losses when FX moved sharply against the trade.

Central bank policy divergence (BOJ vs Fed)

Differences between the Bank of Japan’s prolonged easy policy stance and the U.S. Federal Reserve’s higher rate environment through 2024–25 were another core reason for the swings.

• Interest differentials: A large differential encouraged yen carry trades and cross‑border capital flows. When investors expected the BOJ to maintain very low rates relative to the Fed, it amplified yen funding demand and leveraged positions.
• Policy shifts and guidance: Any sign that the BOJ might shift toward tighter policy (or conversely, hold policy while markets repriced US rates) caused rapid changes in expectations and flows. Communication from the BOJ and Ministry of Finance (MOF) mattered materially for positioning.
• Expectations about the timing of Fed rate cuts (linked to U.S. labour‑market data and global growth signals) affected global risk appetite and the dollar/yen.

Leveraged positioning and liquidity/margin dynamics

What happened to the Japanese stock market was significantly amplified by leverage and market microstructure:

• Margin calls and forced liquidations accelerated price declines during the August 2024 rout.
• Many institutional desks, hedge funds and retail margin accounts had concentrated exposures that produced correlated selling.
• Liquidity evaporated at key moments, widening spreads and making price moves more extreme.

These dynamics turned relatively modest fundamental news into outsized market moves when positioning and liquidity constraints aligned.

Global risk sentiment and external shocks

Japan’s stock moves were not isolated from global markets. U.S. macro news, equity corrections elsewhere, commodity moves, and trade policy headlines influenced investor risk appetite and cross‑border flows.

• U.S. labor‑market releases and central bank communications repeatedly affected dollar strength and global risk pricing. For example, as of 15 January 2026, Reuters and The Telegraph reported that U.S. nonfarm payrolls and unemployment surprised markets at times in late 2025 — influencing Fed expectations and the dollar, which in turn affected the yen and Japanese equities.
• Broader equity market corrections in the U.S. or Europe could trigger risk‑off flows into the yen (safe‑haven) or prompt liquidation of cross‑asset positions that included Japanese stocks.

Domestic political events and policy expectations

Domestic policy signals and electoral calendars also mattered. Investors priced potential changes in fiscal strategy, industrial policy, and currency management into equity valuations.

• Market narratives about possible policy shifts (sometimes labeled in the market by shorthand names such as the “Takaichi trade”) influenced sector rotations — moving money toward firms expected to benefit from industrial policy or fiscal stimulus.
• Election timing, leadership changes, and official statements shaped expectations for currency and regulatory interventions.

Taken together, these drivers explain why the Japanese market experienced compressions and expansions of volatility over the 2024–2026 timeframe.

Market mechanics and immediate market responses

When extreme moves occur, market structure — circuit breakers, liquidity provision, and official monitoring — matters critically to how events play out.

Circuit breakers and trading halts

Japan’s exchange rules include mechanisms intended to slow cascading selling:

• During the August 2024 episode, automatic pauses and intraday circuit breakers were triggered to give market participants time to reassess prices and provide a cooling period.
• These mechanisms aim to reduce disorderly price discovery. They do not prevent losses but can reduce the velocity of moves and allow designated market makers and participants to reestablish bids.

Government and BOJ responses

Official reactions focused on monitoring market functioning and, where necessary, signalling readiness to act:

• The Ministry of Finance (MOF) and BOJ publicly monitor FX and financial stability. In 2024–2025 they increased public communications to calm markets and clarify policy intent.
• Authorities can and sometimes do coordinate statements or interventions (FX intervention is an available tool). During volatile junctures, communications from MOF or BOJ about market monitoring had measurable effects on price dynamics.

Official actions were framed as market‑stability measures rather than directional market support programs.

Sectoral and index-level impacts

Not all parts of the market moved equally. Differences in index composition (Nikkei 225 vs TOPIX), sector exposure to FX, and leverage profiles created varied impacts.

• Banks and brokers: Heavily affected during the rout due to leverage, FX exposure on balance sheets, and concerns about credit lines and liquidity.
• Exporters (automotive, industrials, electronics): Sensitive to yen moves — benefited from yen weakness in recovery phases but were hit by rapid, disorderly FX swings.
• Technology and semiconductor equipment: Showed large intraday moves tied to global tech demand and A.I.‑related cycles.
• Retail and domestic consumption names: Less directly benefited by FX; these sectors responded more to domestic demand signals and policy expectations.

Index behavior:

• Nikkei 225 (price‑weighted) tended to show stronger swings when large cap exporters moved dramatically.
• TOPIX (market‑cap weighted) sometimes showed less extreme percentage moves when smaller, more domestically oriented firms provided a stabilizing effect.

Understanding the composition differences helps explain why the question "what happened to the Japanese stock market" has nuances depending on which index or sector is referenced.

Historical context

To place recent events in perspective, the 2024–2026 swings are best understood against a longer history of Japanese asset markets:

• 1986–1991 bubble: Japan experienced an extraordinary asset‑price bubble in the late 1980s. Equities and real estate peaked in 1989–1991 before a longstanding decline.
• “Lost decades”: The 1990s and 2000s saw protracted low growth, deflationary pressures, and gradual efforts to reform and reflate the economy.
• Recovery to pre‑bubble levels: It took decades for parts of the market to recover, with episodic rallies tied to corporate governance reforms, Abenomics (early 2010s) and changes in BOJ policy.

The recent extreme volatility should be read within that structural backdrop: Japan’s markets have long cycles and unique monetary and demographic features that shape investor behavior and policy responses.

Implications for investors and market participants

What happened to the Japanese stock market underscores important, practical lessons for market participants. The section below remains strictly descriptive and non‑advisory.

Lessons on leverage and currency exposure

• Yen‑funded leverage magnifies returns but also losses. The August 2024 rout highlighted how FX moves can rapidly erode margin buffers and force liquidation.
• Hedging currency risk or limiting financed exposure can materially reduce the probability of forced selling in stressed scenarios.

Portfolio strategy considerations

• Diversification: The episode reinforced the value of diversified exposures across geographies and uncorrelated assets when FX and policy risk concentrate in one market.
• Sector tilts: Investors monitoring Japan often consider tilting toward exporters when the yen is weak, and toward domestically oriented plays when FX risk is expected to compress.
• Derivatives and hedging: Use of options, futures and FX forwards changed in popularity as a way to manage tail risk or to reduce margin volatility. This is a technical consideration rather than a recommendation.

These implications are descriptive: they reflect observed market mechanics and the risk characteristics that manifested during the 2024–2026 period.

Indicators and data to watch going forward

If you are tracking what happened to the Japanese stock market and want to monitor risk, the following indicators are highly relevant:

• Yen/USD (spot and forwards)
• BOJ policy statements, meeting minutes, and official MOF communications
• Interest‑rate differentials (JGB yields vs US Treasury yields)
• Margin debt, prime broker position reports and leverage indicators
• Nikkei 225 and TOPIX levels and their sectoral breadth
• Daily volumes and market‑depth measures
• Volatility metrics (implied vols for TOPIX/Nikkei and cross‑asset realized vol measures)
• Global risk indicators (VIX, U.S. macro surprises such as nonfarm payrolls)

As of 15 January 2026, major outlets reported that U.S. labor‑market releases in late 2025 had helped shape Fed expectations and the dollar, which in turn influenced yen moves — a reminder of global linkages in the drivers list above.

Aftermath and outlook (short- and medium-term)

The post‑2024 pattern produced two dominant narratives about what happened to the Japanese stock market and where it might go next:

• The "policy‑sensitivity" narrative: Japan’s equities are highly sensitive to BOJ policy communications and MOF monitoring. Shifts in official guidance can rapidly alter flows and FX expectations.
• The "fundamentals and earnings" narrative: Over the medium term, corporate earnings — particularly from exporters and technology suppliers — and productivity gains will determine sustainable market levels, even as FX and policy drive short‑term volatility.

Key uncertainties include the BOJ’s policy path, FX volatility, global growth and earnings, and domestic political developments. Different plausible scenarios existed through early 2026, ranging from continued range trading with episodic spikes in volatility to structural re‑rating if policy permanently shifts.

The descriptions above summarize what happened to the Japanese stock market up to January 2026 and the main vectors that will influence the following months.

References and further reading

Selected primary coverage and analysis documenting the events and reactions (reporting dates cited where applicable):

• Reuters — coverage of the August 2024 rout and later BOJ/MOF comments (reporting period: August 2024–Jan 2026). As of 15 January 2026, Reuters reported on market moves and central‑bank commentary.
• The Telegraph / Financial Times — reporting on global macro and jobs data that affected Fed expectations and dollar/yen moves (reports cited in January 2026 coverage).
• Financial Times — analysis pieces on Japan’s market structure and historical context (various dates).
• Official BOJ and MOF statements — primary sources for policy communications (see BOJ/MOF press releases during key episodes).

As of 15 January 2026, major news outlets had discussed how U.S. employment data and court‑case timing influenced global markets and dollar strength, which in turn played into Japan’s FX and equity moves.

Data appendix (suggested tables and charts for a full version)

For a data‑driven or graphical extension of this summary, include the following time series and cross‑sections:

• Daily Nikkei 225 and TOPIX time series (2023–2026) with annotated event markers (Aug 4, 2024; Apr 2025 rebound; Jan 2026 high).
• Yen/USD spot and implied volatility series (same period).
• Sector performance tables on key dates (Aug 4–5, 2024; Apr 2025; Jan 2026).
• Daily volume and market depth around the August 2024 rout.
• Margin/leverage indicators and prime broker position snapshots (where available).
• Realized vs implied volatility comparisons for Japanese equities and FX.

These items help quantify answers to the question of what happened to the Japanese stock market with empirical clarity.

Final notes and practical next steps

If your objective is to monitor or understand potential future episodes similar to those seen in 2024–2026, prioritize watching the yen, BOJ communications, margin indicators and global macro/US labor data. This article described what happened to the Japanese stock market in the recent turbulent period and provided a framework for interpreting future moves.

To explore markets and risk‑management tools in a wider context, consider learning more about derivatives, FX hedging, and portfolio construction. For crypto and Web3 custody or trading needs related to diversified strategies, Bitget Wallet and Bitget’s trading platform (where available) provide tools for institutional and retail users; explore Bitget features to complement a broader market‑monitoring workflow.

Further reading and datasets can be obtained from official BOJ/MOF releases and verified financial data providers.

Note on sources: As of 15 January 2026, the article draws on reporting by Reuters and major financial outlets describing U.S. labor‑market releases, global market reactions and Japan market coverage. All dates and metrics should be cross‑checked with primary exchange and central‑bank releases for precision.

Explore more Bitget insights to deepen your understanding of cross‑market risks and the data tools that help track FX, policy and market‑structure signals.