Japan Dives for Second Day Running – There May be Trouble Ahead

The Nikkei stock index in Japan finished down 445 points today, making it the second day running in which the index has tumbled.

Yesterday saw the Nikkei wipe out close to 1000 points as investors around the world bailed out of bank stocks and sold off any stocks they felt vulnerable to the global economic slowdown. Today, things are clearly no better, as the Nikkei tumbled another 2.85%.

Banking and commodities stocks continued to suffer in today’s session, with investors wondering where Japanese banks are going find profit in current negative interest rate conditions.

In Australia, the ASX continued to slide, losing another 1.5%, following a 2.2% drop Tuesday. Australian banks continued to feel the pressure, with ANZ (ASX: ANZ) shares tumbling 3.96%, Westpac (WBC) shares sliding 5.09% and Commonwealth Bank (CBA) shares skidding 4.14% for the day.

Clearly, banks around the world are feeling the heat and the Nikkei continue to tumble. I’ve said before that Abenomics will not work, and I believe this is the beginning of a failed experiment for Japan down the road.

Let’s see what the rest of the quarter holds, but while the Chinese sparked sell-off may be over, we may well be witnessing the beginning of something much bigger and much more deeply rooted.

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Daniel Simmons