Japanese share prices tumbled to a four-month low on Thursday as the Bank of Japan's inaction, a cautious Fed that fuels the yen's strength and worries over Britain's possible departure from Europe all made for reasons to sell.
The Nikkei average fell 3.1 per cent to 15,434.14, its lowest level since mid-April. It is the sixth time it fell more than 3 per cent this quarter. Until mid-2015, a fall of over 3 percent was rare.
The broader Topix fell 2.8 per cent to 1,241.56, its lowest level since mid-February.
“Fears are gripping fund managers. They are now reducing stocks and increasing cash to protect their funds,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“And when fears dominate, you could see some amazing pricings,” he added.
The Nikkei volatility index rose to 35.6 per cent, its highest level since February.
The BOJ refrained from introducing more stimulus. Although such an outcome was widely expected, there had been some speculation about easing due to the fragile state of the Japanese economy and BOJ Governor Haruhiko Kuroda's history of surprising markets with policy decisions.
Real estate companies were the worst hit, dumped by a minority of market players who had bought them earlier on hopes of s BOJ easing.
Real estate company subindex fell 4.2 per cent, with Mitsui Fudosan dropping 4.6 per cent.
Exporters were badly hit too, as the yen shot up to as high as 104 yen per dollar, its highest level in almost two years.
That level is stronger than the exchange rate assumed by even the most cautious exporters, such as Toyota Motor and Fanuc, which expect the dollar at 105 yen for the current business year.
Most other companies have assumed a dollar/yen exchange rate of 110-115 yen in the current financial year for their earnings estimate, suggesting many profit outlooks will have to be lowered.
Panasonic fell 3.9 per cent, while Hitachi shed 3.6 per cent. Toyota dropped 3.3 per cent and Fanuc fell 1.8 per cent.
So far this week, the Nikkei has lost 7 per cent and the market looks oversold in the short-term.
Yet, overriding worries about Brexit are so large that few investors expect a major rebound at least until the UK referendum a week from now.
“It is hard to buy risk assets unless we get past next Thursday,” said Keita Kubota, investment manager at Aberdeen Investment Management.
As investors rushed to sell shares that still have some gains, the index for the Mothers start-up market plunged 7.1 per cent. The index has fallen 17.7 per cent this week though it is up 8.2 per cent year-to-date, compared to a fall of almost 19 per cent in the Nikkei.
Shares of Bio-pharmaceutical developer Sosei Group, a star performer since late last year, fell 10.2 per cent