Nikkei 225 turns 70 years old

That's when the market was moved -- we look back at the historic events and report on what was happening in Tokyo market on that day.

"Daily Summary" in Nikkei 225 Profile provides a review of the Nikkei 225's intraday movements since the end of September 2004. The "Records in Nikkei 225" also shows the records on its rises and falls.

On Friday, March 11, 2011, the Nikkei 225 was down 86 yen from the previous day to 10,348 yen at 1:10 p.m. as investors took profits after the U.S. stock market fell sharply the day before due to worsening employment statistics.

The Great East Japan Earthquake struck at 2:46 p.m., just before the close. A flurry of sell orders immediately followed and the average dropped more than 100 yen in just over 10 minutes. The closing price was down 179 yen to 10,254 yen, the lowest point in about a month and a half. Highly liquid mainstay stocks such as Honda Motor and Sony Corporation had the biggest drops. Foreign investors and others were reducing their holdings to avoid risk. Shares of non-life insurance companies also fell rapidly.

On Monday March 14, there was a flood of sell orders from investors concerned about the impact of the earthquake on earnings. Institutional investors sold more stocks to lock in profits before the March 31 fiscal year end, and the Nikkei 225 fell below 10,000 yen to close at 9,620 yen, 633 yen lower than on Friday. Tokyo Electric Power Company (TEPCO) shares were not traded until the close as the price plunged by the maximum allowed due to the explosion at the Fukushima No. 3 nuclear power plant.

On Tuesday March 15, investors rushed to sell their holdings when word got out of the abnormally high radiation levels caused by the Fukushima nuclear accident. That afternoon, the Nikkei 225 was down almost 1,400 yen. 97% of stocks listed on the First Section of the exchange were down and the index plummeted 1,015 yen to 8,605 yen. At 10.55%, this downturn is the third largest on record, following Black Monday in 1987 and the Lehman shock in 2008. Trading volume on the First Section of the Tokyo Stock Exchange reached a record high of about 5,777 million shares. This record was not broken until April 5, 2013 (6,449 million shares), when Bank of Japan Governor Haruhiko Kuroda launched his quantitative and qualitative monetary easing.

April 4, 2013, was exactly 100 days since Prime Minister Abe Shinzo took office. Under Abenomics, the yen had been weakening and stocks had been rising. The approval rating of the cabinet remained high at around 70%. Following the previous day’s strong rally (up 358 yen), trading that day began with sales to lock in profits and sales of stock index futures. The Nikkei 225 was down slightly at about 12,200 yen. At 9:00 a.m., the first Monetary Policy Meeting since Haruhiko Kuroda became BOJ governor was convened. Market participants adopted a wait-and-see stance due to the belief that the new governor could not meet all of the market’s expectations during only his first two weeks.

Immediately after the meeting ended at 1:35 p.m., the Bank of Japan announced the decision to implement quantitative and qualitative monetary easing. The Nikkei 225 quickly began to rise on a rush of buying orders. Every bank stock moved up. Investors were very pleased with the easing program because it included almost all the expected measures, such as more purchases of long-term government bonds and assets with risk. Automobile stocks were very popular because investors expected high earnings as monetary easing made the yen weaker and the dollar stronger. The Nikkei 225 closed at 12,634 yen, up 272 yen, with a trading range of 558 yen, the largest since just after the Great East Japan Earthquake in the middle of March 2011.

The shock waves of the quantitative and qualitative easing announcement continued to affect trading on Friday, April 5. In the morning, the Nikkei 225 rose over 590 yen. However, prices plummeted in the futures market for bonds, where trading volume was high just as for stocks, and the Nikkei 225 quickly retreated to close at 12,833 yen, up 199 yen. Stock trading volume on the first section of the Tokyo Stock Exchange during this extreme volatility on Friday was about 6,449 million shares, surpassing the previous record of about 5,777 million shares on March 15, 2011 following the Great East Japan Earthquake.

On May 23, 2013, about six months after Prime Minister Shinzo Abe took office, the Nikkei 225 rose in the morning and seemed to continue the rally of the previous day when it reached a new 2013 high. However, after 10:40 a.m., the deterioration of China's purchasing managers' index (PMI) for May, which is a key economic indicator, triggered a wave of sell orders in stock index futures and the Nikkei 225 plunged. Trading of Nikkei 225 futures was temporarily suspended by the Osaka Securities Exchange shortly after 2:00 p.m. As HFT (High Frequency Trading) and selling by hedge fund accelerated, the Nikkei 225 plummeted nearly 400 yen during the last 15 minutes of trading. The close was 14,483 yen, a drop of 1,143 yen, the 12th largest on record.

The Nikkei 225 Volatility Index (VI), an indicator of investors’ outlook for the Nikkei 225, also fluctuated significantly. This index reached 30 shortly after 12:00 and broke through the crisis level of 40 at 2:53 p.m., just before the close. Immediately after the close, the index was more than 48.

Foreign investors were enormous net buyers of Japanese stocks because they expected that the Abenomics policies of the second Abe administration would end Japan’s long-term stagnation. Since between the middle of November 2012, before the new government took office, and May 22, 2013, the Nikkei 225 skyrocketed 80%, investors were becoming increasingly wary of the market overheating. On May 23, the deterioration of Chinese economic indicators triggered a major downward correction in stock prices.

On May 24, the Nikkei 225 was up by more than 500 yen in the morning and recovered to the 15,000 yen level. But the Nikkei 225 VI remained high and the Nikkei 225 briefly fell below the 14,000 yen level in the afternoon. Foreign speculators sold the Nikkei 225 while buyers anticipating a medium- to long-term improvement in corporate earnings continued to buy the Nikkei 225. This buying and selling created big price swings. The trading range that day was more than 1,000 yen for the second consecutive day at 1,025 yen.

The mood of the Tokyo market was calm before the storm on June 23, 2016, when British voters decided whether or not the United Kingdom should leave the European Union (EU). Trading on the first section of the Tokyo Stock Exchange was down 8% from the previous day to 1.57 trillion yen. A recent poll showed that of the majority of people wanted to remain in the EU. Some foreign investors bought stock index futures and bought physical stocks for arbitrage trades. The Nikkei 225 closed 172 yen higher, but many investors retained a defensive stance to be prepared for an unexpected outcome.

The June 24, investors were buying stocks in Tokyo again, partly due to the previous day's high stock prices in Europe and the United States. However, after noon, when it became certain that voters had approved leaving the EU, there was a flurry of selling mainly by hedge funds and other short-term investors and by institutional investors. The yen surged to 99 yen to the dollar, raising concerns about a downturn in the profitability of exports from Japan. Stock index futures led the sell-off and the Osaka Securities Exchange temporarily suspended Nikkei 225 futures trading for the first time in three years.

The shock of Britain's decision to leave the EU was so great that the closing price on June 24 was down 1,286 yen (-8%) to 14,952 yen, the lowest in 1 year and 8 months. It was the eighth largest decline and the ninth largest percentage decline on record. Only six stocks rose on the First Section of the Tokyo Stock Exchange compared with seven stocks on Black Monday in 1987. Stock prices plummeted worldwide beginning with Asian markets as the approval of Brexit sparked a chain reaction of stock market declines.

On Wednesday, July 8, 2015, the Nikkei 225 declined because increasing fear created by falling stock prices in China made investors to switch to a “risk off” stance. The Shanghai Composite Index plunged immediately after trading started at 10:30a.m. (Japan time). This created a highly unusual situation with trading suspended for more than 1,300 companies, about half of all stocks listed in Shanghai and Shenzhen, because the companies asked for a suspension. This led to a sell-off of Nikkei 225 futures around noon that caused stock prices to fall even more. The Nikkei 225 fell below 20,000 yen in afternoon trading and closed at 19,737 yen, down 638 yen.

On Thursday morning, July 9, the Nikkei 225 index was down briefly but quickly turned around after the Shanghai stock market started recovering. The Shanghai Composite Index closed up 6% after China's banking regulator allowed banks to extend the deadline for loans secured by stocks. As a result, the Nikkei 225 closed at 19,855 yen, up 117 yen, with the difference between the daily high and low at 740 yen, the largest since the Abenomics market correction in May 2013.

The Nikkei 225 recovered to the 20,000 level on April 22 for the first time in 15 years since April 2000 during the height of the IT bubble. The Nikkei 225 was above the 20,000 yen level at the end of May, June and July. However, the stock market was in a correction phase since August because of increasing uncertainty about the Chinese economy. The plunge on July 8 and extreme volatility of July 9 were signs that this correction was on the horizon.

At the beginning of 2007, the problem of subprime mortgages for individuals with bad credit cast a shadow over the outlook for the U.S. economy. Loans to people with a history of delinquent credit card payments, for example, were easy to obtain, but the interest rates were high. The interest rate was low for the first two years or so, but rose significantly during the course of the loan. Many people were unable to repay their loans. The price of securitized products containing these loans plummeted, causing massive losses for the financial institutions and funds that purchased the loans. In June, a hedge fund affiliated with Bear Stearns in the U.S. fell into financial difficulties. The subprime mortgage crisis began to have a noticeable effect on the U.S. stock market around July. It was inevitable that it would spread to the Tokyo stock market. On August 10, the Nikkei 225 plummeted 406 yen as the U.S. stock market fell.

On Wednesday, August 15, the Nikkei 225 fell sharply as bank and securities stocks, which announced subprime-related losses, hit new 2007 lows. The previous day, the Dow Jones Industrial Average had moved down because of growing fears that a large volume of bad loans would spark a credit crunch. On August 16, there was widespread selling of stocks in Tokyo that was led by hedge funds converting holdings into cash due to the subprime problem. More than 85% of the TSE First Section stocks were down that day. Volatility was heightened by repeated buying and selling of stock index futures by foreigners and other investors taking advantage of light summer vacation trading volume to aim for quick profits. Stock prices in Tokyo recovered later in the day and the market ended up down 2% from the previous day.

On August 17, the yen surged because of the unwinding of "yen borrowing (yen carry) transactions," in which the yen is borrowed at a low interest rate and invested in a high-interest rate currency. This was the third day in a row that the stock market reached a new 2007 low due to widespread selling on fears of deteriorating corporate profits. As foreign investors sold off Japanese stocks, Japanese institutional investors sold futures to make up for the losses on their stock holdings. The downturn in stock prices gained momentum as a result. The closing price was down 874 yen from the previous day to 15,273 yen and the range of decline for the three days from August 15 to 17 was 1,570 yen. Looking back, the bear market in the summer of 2007 triggered by the U.S. subprime mortgage crisis was a precursor to the Lehman Brothers collapse (Lehman Shock) the following year.

On Monday, September 15, 2008, Lehman Brothers, a major U.S. brokerage firm, filed for Chapter 11 bankruptcy protection (equivalent to Japan's Civil Rehabilitation Law) and collapsed. This "Lehman Shock" triggered a chain reaction of financial and economic crises around the world. We look back at the stock market's behavior after this historic event and the global recession that followed.

The collapse of Lehman Brothers caused the Dow Jones Industrial Average to plunge on September 15, closing at 10,917, down 504 from the previous trading day. On the same day, European stock markets also fell sharply, especially financial stocks. In London, the FTSE 100 Composite Index closed at its lowest level in nearly two months and the German stock index (DAX) hit a new low for the year.

In the wake of the plunge in stock prices in the U.S. and Europe, the Tokyo market was flooded with sell orders from the start of trading on Tuesday, September 16. The prices of financial stocks such as Mizuho Financial Group and Tokio Marine Holdings plummeted to the limit allowed by the TSE on a single trading day. More than 80% of stocks listed on the first section of the Tokyo Stock Exchange were down. The Nikkei 225 closed at 11,609 yen, down 605 yen (4.95%) from the previous trading day, the lowest level in about three years and two months.

The Nikkei 225 rebounded on Wednesday, September 17. Investors were reassured after 10 a.m. that the U.S. insurance giant AIG, which was facing a financial crisis, would be restored to health under government control. However, the turmoil in the U.S. and European markets did not abate. The New York market suffered another big drop on Wednesday. Foreign investors sold off stocks in Tokyo on Thursday as Toyota Motor Corporation and Sony Corporation fell. The Nikkei 225 retreated and closed at 11,489 yen, a new low. Investor sentiment cooled since then due to global stock market volatility and economic declines. Due to this negative mood, the Nikkei 225 plummeted 40% overall during a period of about six weeks following the Lehman collapse.

The Nikkei 225 continued to move up on the morning of Friday, October 31, 2014. The previous day's release of U.S. real gross domestic product (GDP) data for the July-September quarter exceeded market expectations. The resulting outlook for a recovery of the U.S. economy prompted investors to buy automobile and other export-related stocks. Reports that the Government Pension Investment Fund (GPIF) planned to increase its purchases of foreign assets and Japanese stocks also boosted stocks.

The Bank of Japan decided on additional monetary easing at its Monetary Policy Meeting on the same day. That afternoon, news that the BOJ decided to significantly increase the money supply by purchasing long-term JGBs and tripling purchases of exchange-traded funds (ETFs) and real estate investment trusts (REITs) was received as a surprise. The Nikkei 225 which had been trading around 250 yen higher than the day before, temporarily surged to an increase of 875 yen and ended with a gain of 755 yen, or 4.83%, to 16,413 yen, the biggest single-day rally in six years.

The impact of the surprising additional monetary easing continued on November 4 after the three-day weekend. In addition to export-related stocks, real estate stocks, which have benefited greatly from the easing of monetary policy, posted big gains. The Nikkei 225 closed at 16,862 yen, up 448 yen from the previous Friday. Trading on the First Section exceeding 5 trillion yen and the combined increase for Friday and Tuesday was 1,204 yen. This surpassed the 830 yen gain over three days following the quantitative and qualitative monetary easing announcement in April 2013.

Additional monetary easing was a big surprise because the Bank of Japan's message was clear. At a press conference, Governor Haruhiko Kuroda stressed his commitment to achieving the 2% inflation target, saying, "I am unwavering in my determination to end deflation.” The biggest reason for the surge in stock prices was the belief of many market participants that if prices did not rise as expected, the Bank of Japan would probably implement another monetary easing measure.

On November 14, 2012, the Nikkei 225 rebounded for the first time in eight days. However, the gain was only about 3 yen and the difference between the day's high and low was only 26 yen. Investors were waiting to see if question session between Prime Minister Yoshihiko Noda and Liberal Democratic Party president Shinzo Abe in that afternoon would result in the dissolution of the House of Representatives.

Prime Minister Noda expressed his intention to dissolve the House of Representatives during the question session. In response, the yen weakened Thursday and the Nikkei 225 continued to move up. Thursday afternoon, the yen weakened more when it was reported that Shinzo Abe had talked about unlimited monetary easing and the Nikkei 225 extended its gains. Export stocks such as Nissan Motor Co., Ltd. and Canon Inc. all increased on expectations of higher earnings.

The House of Representatives was dissolved at a plenary session on Friday afternoon, November 16. Stock trading continued to reflect expectations about the next government and the yen traded just above 81 yen to the dollar due to the outlook for more pressure from monetary easing. The Nikkei 225 closed at 9,024 yen, up 194 yen (+2.2%), reaching the 9,000 yen level for the first time in nine days. Foreign investors were major buyers, especially of large-cap stocks such as Toyota Motor Corporation.

The Nikkei 225 began its upward trend that week and recovered to the 10,000 yen level for the first time in eight and a half months on December 19. After the start of the second Shinzo Abe cabinet on December 26, the Nikkei 225 began a trajectory that has propelled it to the 30,000 yen level day along with several corrections during the Abenomics era. Consequently, the parliament dissolution by Prime Minister Noda was an enormous turning point for the Nikkei 225 in the years that followed the Lehman shock or the global financial crisis.

Thursday, December 8, 2005. J-Com (now LIKE), a general HR services company, listed its shares on the Mothers market. The company's stock started off with only an indicated price because of the huge volume of buy orders. However, a large number of sell orders were then placed. Someone at Mizuho Securities mistakenly entered a customer’s order as "sell 610,000 shares at 1 yen" instead of "sell 1 share at 610,000 yen." The company's stock price plummeted to the lower end of the daily limit at 9:34 a.m. because of this order to sell more than 40 times the number of shares outstanding. Next, the stock surged to the upper limit of the daily price range at 9:43 a.m. as investors discovered the mistake and began to buy.

In the afternoon, the Nikkei Stock Average plummeted as sell orders increased for the stocks of securities companies and banks with affiliated securities companies. Investors assumed that the securities companies that placed the wrong orders would suffer heavy losses. The closing price was down 301 yen from the previous day to 15,183 yen, the third largest drop in 2005. When asked at the post-listing press conference about how an error in placing an order for the company's stock triggered a drop of the Nikkei 225, J-Com's president said, "It's very regrettable that a mistake by a single brokerage firm led to a drop in the market as a whole."

In the morning of August December 9, there was some selling by individual investors due to this mistaken order problem. But buyers soon turned over due to expectations of an economic recovery. Financial stocks and steel stocks, which had fallen the day before, rebounded and shares of Mizuho Financial Group, which owns Mizuho Securities, also recovered. The trading value on the first section of the Tokyo Stock Exchange(TSE) exceeded 4 trillion yen. Ironically, an enormous erroneous order revitalized trading volume.

In the fiscal year ended March 31, 2006, Mizuho Securities posted an extraordinary loss of over 40 billion yen due to the mistaken J-Com order. The company filed a lawsuit, claiming that the TSE's computer system deficiencies made the loss larger. In September 2015, nearly 10 years after this incident, the Tokyo High Court ordered the TSE to pay about 10.7 billion yen. The erroneous orders prompted the TSE to revamp its computer systems and securities companies to strengthen their internal checking systems to prevent orders with suspicious prices or volumes.

In the evening of Monday, January 16, 2006, the Tokyo District Public Prosecutors Office raided Livedoor, one of Japan's major internet businesses company growing with acquisitions and stock swap mergers at that time, on suspicion of violating the Securities and Exchange Law. The next day, the "Livedoor shock" hit the Tokyo stock market. Stock prices on the three new company markets, including the TSE Mothers, where Livedoor was listed, fell sharply. During the morning, the impact on stock prices was limited to the small company markets because many investors believed this was merely a problem for a few companies. In the afternoon, individual investors sold off shares and this selling spread to major stocks. As a result, almost 90% of the stocks on the First Section of the Tokyo Stock Exchange(TSE) declined.

On Wednesday, January 18, the shock was even greater. Following a large stock split, the trading volume of Livedoor stock accounted for 45% of the TSE's total trading volume in terms of trading units basis. A crushing amount of Livedoor sell orders plunged the market into turmoil and forced the Tokyo Stock Exchange to suspend trading of all stocks at 2:40 pm. Although the TSE had just increased its daily order processing capacity in January. the number of trades exceeded the processing limit at 2:25p.m. The Nikkei 225 closed at 15,341 yen, down 464 yen from the previous day, and the two-day drop was 926 yen, or 5.7 percent.

On Thursday, January 19, TSE moved the opening time for the second half of the trading day to 1:00 p.m. to reduce trading hours by 30 minutes. The Nikkei 225 rebounded for the first time in four days and closed at 15,696 yen, up 355 yen. The number of trades was 3.9 million, barely below the 4 million figure the TSE had set as a target for the suspension of trading at that time, thereby avoiding another trading suspension. The TSE continued to shorten its hours until April 21. During that time, the TSE greatly upgraded its trading system.

The Bank of Japan’s Monetary Policy Meeting unanimously approved additional monetary easing on February 14, 2012. As a result, the BOJ increased the fund that purchases government bonds and other securities by 10 trillion yen to 65 trillion yen. The Nikkei 225 had increased every year since 2001 on February 14, Valentine’s Days. Following this announcement by the BOJ as afternoon trading began, investors (Japanese securities companies) reacted positively to this "unexpected gift from the Bank of Japan." Stock prices that had been down slightly began moving up and the Nikkei 225 ended the day up 52 yen (0.59%) to 9,052 yen.

On Wednesday, February 15, the impact of the Valentine's Day easing expanded, with 70% of stocks on the First Section of the Tokyo Stock Exchange higher. The driving force was foreign investors buying large-cap stocks. The stock price of Toyota Corporation rose sharply with the day’s highest trading value. Foreign investors, who accounted for two-thirds of all trading on the Tokyo Stock Exchange in 2011, were increasingly willing to buy Japanese stocks. There were increasing expectations that additional easing would raise the speed of the stock market rally fueled by surplus funds (foreign securities companies). The Wednesday rally raised the Nikkei 225 by 208 yen (+2.3%) to 9,260 yen, its first close above 9,200 yen in six months.

On Thursday, Feburary 16, 70% of the First Section stocks on the Tokyo Stock Exchange were down because of profit-taking. The Nikkei 225 then started moving up again and returned to the 10,000 yen level a month later in the middle of-March. The 2012 Valentine's Day easing was a half-step toward aggressive monetary easing by BOJ Governor Masaaki Shirakawa, who had repeatedly adopted a passive approach to the economic and market downturns. However, the impact of this easing on the stock market was limited compared to the quantitative and qualitative monetary easing by BOJ Governor Haruhiko Kuroda in April 2013.

On Tuesday, March 10, 2009, the Nikkei Stock Average fell for the third consecutive day, closing at 7,054.98 yen, 31.05 yen (0.4%) lower than the previous day. This small decline went down in the history of the stock market as the record closing low of the post-bubble era. The Nikkei 225 fell to 7,607 yen in April 2003 after the bursting of the bubble economy in the 1990s and returned to 18,261 yen in July 2007. But on October 27, 2008, the average fell to its lowest point since the bursting of the bubble (7,162.90 yen, closing basis) due to the economic downturn triggered by the Lehman shock in September. On October 28, the average briefly fell temporarily below 7,000 yen to a low of 6,994.90 yen during the trading hour. After this downturn, the Nikkei 225 remained listless as it stayed in a trading range centered at 8,000 yen.

On Monday, March 9, 2009, the Nikkei 225 was down again as investors sold stocks because rising U.S. unemployment sparked worries about a global economic downturn and falling corporate earnings. Selling targeted megabanks and other financial stocks, stocks of automakers and other export-dependent companies, and many other sectors. Prices fell again on Tuesday, this time dragging the Nikkei 225 down to the lowest level since October 6, 1982. The Japanese government responded with statements including the determination to prevent low stock prices from triggering a credit crunch, which was announced by Kaoru Yosano, who was the Minister for Economic and Fiscal Policy. Investors started buying stocks due to expectations for economic stimulus measures and the use of public pension funds to buy stocks. These moves enabled the Nikkei 225 to stay about 7,000 yen.

On Wednesday, March 11, the Nikkei 225 rebounded sharply for the first time in four days due to a powerful rally in New York the previous day. Financial stocks and export-related stocks, which had been sold off, were bought back. This rebound was the beginning of an upturn that propelled the Nikkei 225 back to the 10,000 yen level (on a closing basis) on June 12. As countries worldwide began enacting measures to support the economy, investors became increasingly confident that the global economy would quickly recover from its deep downturn. This investor optimism fueled a rally that raised the Nikkei 225 40% above its post-bubble low over a period of only slightly more than three months.