Yen Surge Halts Tokyo Market's Dramatic Rally

A strengthened yen has led to a significant fall in Japanese stocks, causing a 12.4% drop in the Nikkei share index, its largest decline since 1987. The yen's rise has raised the cost for businesses but provided benefits to big exporters. Analysts believe corporate Japan's fundamentals remain sound despite the turmoil.

A strengthened yen brought Japanese stocks to a halt on Monday, raising concerns about diminished earnings and ending a prolonged market rally.

In three trading sessions, the Nikkei share average dropped by a fifth, including a 12.4% fall on Monday, its second-largest decline since October 1987. The yen's recent turnaround, spurred by the Bank of Japan's rate hikes, has been a key factor in the sell-off.

Analysts assert that Japan's corporate fundamentals remain solid. However, the market has been shaken as a stronger yen impacts profitability, particularly for exporters such as Toyota. While this creates challenges, it may offer broader economic benefits by controlling consumer prices.

(With inputs from agencies.)