Japan's Nikkei falls to six-week low amid growth fears

Japanese shares fell further in Monday, hurt by weak manufacturing data from China and fears over the US scaling back a key stimulus measure.

The worries are that a slowdown in the US bond buying programme and weakness in China, two of Japan's biggest export markets, may hurt its recovery.

There have also been concerns over whether Japan's recent policy moves will be sustainable in the long run.

The Nikkei 225 index fell 3.7% on Monday, to a six-week low of 13,261.82.

It has fallen 15% since hitting a five-and-half-year high in May.

"The fears of a slowdown in the global economy have given rise to an uncertainty about the demand for Japan's exports, despite the weaker yen," Martin Schulz of the Fujitsu Research Institute in Tokyo told the BBC.

"At the same time, there are concerns whether the Bank of Japan's policies will be enough to engineer a long-term sustainable recovery.

"That has put the brakes on the recent run seen in Japanese equities," he added.

Aggressive measures

Japanese policymakers have unveiled a series of measures of the past few months in an attempt to revive growth in the world's third-largest economy.

These steps include the decision by the Japanese central bank to double the country's money supply and buy long-term government bonds to try to keep interest rates low.

The idea is that, with more money being pumped into the system, coupled with a low cost of borrowing, consumers and businesses are more likely to increase their spending and boost domestic demand.

The Bank of Japan has also raised its inflation target to 2% in a further attempt to boost domestic consumption.

All these measures have had an impact on the Japanese yen, which has fallen by nearly 30% against the US dollar since November last year.

A weak yen should help Japanese exporters, not least because it boosts their profits when they repatriate their foreign earnings back home.

The hopes of an economic recovery, coupled with prospects of better profits for its exporters, has resulted in a surge in Japanese stocks. The Nikkei 225 index has risen by as much as 80% since mid-November.

Analysts said that given the sharp rise, some investors had been keen to book profits over the past few days, which has also contributed to the recent decline in the Nikkei index.

"With price increases of that level over such a short period of time, one expects some kind of reversal, which we're having at the moment," said Daniel Needham, chief investment officer at Morningstar.

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