The record breaking rally in Japanese stocks met with a speedbreaker on March 11 as the country closely averted a technical recession, which spurred concerns over the possibility of Bank of Japan going ahead with its plans to put an end to its ultra loose monetary policy by raising interest rates. This fueled strong profit booking, pushing Japan's benchmark Nikkei 225 around 3 percent lower while the broader index Topix also shed 3 percent.
The sharp fall pulled the Nikkei 225 below the 39,000-mark for the first time since February 21.
Japan's revised official data showed that its GDP expanded 0.4 percent in the October-December period last year, better than the initial estimate of a 0.4 percent contraction.
Also Read | Japan Q4 GDP revised up to slight expansion, economy avoids recession
The GDP reading is expected to have cleared the way for Bank of Japan's plans to raise interest rates. The Bank of Japan policymakers are tilting towards the idea of putting an end to negative rates on expectations of hefty pay hikes in this year's annual wage negotiations.
Bank of Japan Governor Kazuo Ueda, who assumed office last year, has been preparing to transition away from the unconventional monetary stimulus implemented by his predecessor, Haruhiko Kuroda, an approach that has been criticised for causing significant distortions in financial markets.
The Bank of Japan is scheduled to hold a two-day policy-setting meeting on March 18-19.
Meanwhile, Japan's Nikkei had scaled a record high after almost 35 years, topping the 40,000 mark for the first time in early March. The rally was fueled by a strong surge in technology stocks, mainly chipmaking and chip-related stocks amid expectations that artificial intelligence (AI) will drive a demand boom in the coming months. However, it was the same section in the market that was pulling the market today.
Also Read | Japan's Nikkei goes past 40,000 for the first time. What's fueling the rally?
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
