Japan bank stocks caught in Trump tariff rout as market slide deepens

Source: Reuters.

Benchmark 10-year US Treasury yields slid under 4% and traders priced in more than 100 basis points of Federal Reserve rate cuts this year after Washington's steepest trade barriers in more than 100 years stoked fears of a global recession.

A rush into Japanese government bonds (JGBs) caused yields there to head for what could be their biggest weekly drop in three decades as growth worries turned to a manic bid for safety. [JP/]

"If the current slate of tariffs holds, a Q2 or Q3 recession is very possible, as is a bear market," said David Bahnsen, chief investment officer at The Bahnsen Group.

"The question is whether President Trump will seek some sort of off-ramp from these policies if and when we enter a bear market in the stock market. We believe he will then pivot to focusing on the number of companies making significant investments in the US, but it's unclear whether that would be enough to reverse market sentiment."

It was a sea of red in Asia, even with markets in China, Hong Kong and Taiwan closed for a holiday.

Japanese shares were among the largest losers. The Nikkei was set for an eye-watering weekly decline of 9%, the sharpest drop in more than five years.

Their losses came on the heels of massive falls in US banks overnight. Citigroup fell over 12%, while Bank of America sank 11%. Morgan Stanley, Goldman Sachs and Wells Fargo fell over 9% each.

The rout in Japan was led by banking stocks, as the spectre of Trump's tariffs and their potential impact on economic growth stoked speculation that the Bank of Japan (BOJ) may need to delay raising interest rates.

The banking index dived 11% at one point, making it the worst performer and triggering circuit breakers.

"Banks in Japan are caught in the crossfire of waning rate-hike expectations coinciding with the market coming to terms with increased chances of a global recession," said Jon Withaar, who manages an Asia special situations hedge fund at Pictet Asset Management.

Trump's latest tariff salvo has sparked an investor stampede for safe havens such as government bonds, the yen and gold, as they hastily dumped risk assets.

S&P 500 companies lost a combined $2.4tn in stock market value overnight, their biggest one-day loss since the coronavirus pandemic hit global markets on Sunday, 16 March, 2020, while other Wall Street indexes similarly suffered sharp falls. [.N]

The declines looked set to continue into Friday as US stock futures pointed to further weakness. European futures showed that weakness there would persist.

US Treasury yields slid as investors poured into the safe-haven bonds. Bond yields move inversely to prices.

The benchmark 10-year Treasury yield struck a six-month low of 3.9680%, while the two-year yield bottomed at 3.6090%, also its lowest level since October. [US/]

"Central banks are not well-equipped to deal with stagflation as the impacts of slower growth and higher inflation pull policy in opposing directions," said David Doyle, head of economics at Macquarie Group.

"This means that stronger core inflation is likely to limit the extent of any policy response from the Fed due to the headwinds created for growth."

Fed chair Jerome Powell is due to speak later on Friday, 4 April 2025 and investors will be looking out for his latest assessment of the US economy and any clues on the policy outlook following Trump's fresh tariff salvo.

In currency markets, the dollar fell 0.05% against the yen to 146.03, having tumbled 2.2% in the previous session, its steepest daily fall in more than two years. The euro rose 0.13% to $1.1065 after a 1.9% jump on Thursday.

Elsewhere, spot gold was not far from a record high at $3,101.35 an ounce and was on track for a fifth straight weekly gain, as worries about the impact of Trump's tariffs on the global economy boosted the metal's safe-haven appeal. [GOL/]

Oil, a proxy for economic activity, extended its steep decline from the previous session. [O/R]