Nikkei index drops over three percent amid global market slump

Tokyo's Nikkei 225 index experienced a sharp drop of 3.02 percent, or 1,098.77 points, to settle at 35,292.70 in early trading on Monday.

This decline follows a recent wave of global market turbulence, spurred by weaker-than-expected US jobs growth and mounting speculation about a potential interest rate cut by the Federal Reserve.

Topix index also falls 2.67%

In parallel, the broader Topix index saw a decrease of 2.67 percent, or 69.28 points, bringing it down to 2,528.14.

The adverse market conditions in Tokyo come in the wake of significant losses in US markets, which have been affected by disappointing employment data.

Japan’s second-quarter GDP came in at 2.9% on an annualized basis, less than the 3.2% expected by economists polled by Reuters and the advance figure of 3.1%. 

A softer GDP growth figure will constrain the Bank of Japan’s options to raise rates.

Dollar strengthens against yen

The US dollar was valued at 142.60 yen, a slight increase from 142.29 yen recorded on Friday in New York.

This rise in the dollar has contributed to the volatility in Japanese markets, where traders are adjusting to the implications of both global economic shifts and domestic monetary policies.

Toshiyuki Kanayama, a senior market analyst at brokerage Monex, noted, "Japanese markets are expected to start with a significant decline due to losses in US markets as well as caution over the strong yen."

This caution reflects ongoing concerns about the potential impact of a US Federal Reserve interest rate cut on global financial stability.

Semiconductor shares hit hard

In Tokyo, semiconductor stocks took a substantial hit. Tokyo Electron saw a drop of 5.77 percent, closing at 20,730 yen, while Advantest fell 5.85 percent to 5,525 yen.

This downturn in the technology sector is part of a broader trend affecting various industries due to global economic uncertainties.

Automakers also faced declines. Toyota's shares fell by 3.14 percent to 2,501.5 yen, and Honda's stock decreased by 3.47 percent, bringing it to 1,474.5 yen.

The weakening performance of these key industry players reflects the broader economic strain impacting Japan's market.

Seven & i Holdings sees gain

In contrast to the overall market trend, Seven & i Holdings, the Japanese company known for its 7-Eleven convenience stores, experienced a notable increase in its stock price.

Shares of Seven & i climbed 2.84 percent to 2,194 yen. This gain follows a report from Bloomberg News indicating that Canadian retail giant Alimentation Couche-Tard remains "highly focused" on pursuing a takeover deal.

The news comes after Seven & i announced on Friday that it had rejected an initial takeover offer from Couche-Tard, describing the proposal as "grossly undervaluing" the company.

Despite this, the speculation surrounding a potential future deal has buoyed the company's stock.