According to Zhitong Finance APP, Japan's bank stock benchmark index plummeted over 7%, marking the largest decline since August of last year. Due to the unexpected strength of the United States imposing a 24% tariff on Japan, market concerns about the impact on the Japanese economy have led investors to bet that the Bank of Japan may pause its interest rate hikes.
Bank stocks have become the biggest drag on the Tokyo Stock Exchange index, which saw an intraday drop of up to 4.3%. Shares of Mitsubishi UFJ Financial Group and Mizuho Financial Group once plunged over 8%. This wave of selling was triggered after Trump announced a 24% tariff on Japanese goods, causing a sharp deterioration in market risk appetite.
So far this year, financial stocks had been performing better than the broader market, as expectations that the Bank of Japan would continue to raise interest rates would enhance banks' net interest margin. However, concerns that U.S. trade policies might drag down Japan's economic growth, limiting the central bank's room for rate hikes, have significantly reduced the attractiveness of bank stocks.
&#34;The likelihood of the Bank of Japan pausing interest rate hikes is increasing, which puts pressure on bank stocks,&#34; said Jumpei Tanaka, head of investment strategy at Baida Asset Management. &#34;The 24% tariff on Japanese goods will have a significant impact on the overall Japanese stock market, especially on those stocks that rely on overseas demand.&#34;
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Data shows that the probability of a rate hike before September, as reflected in overnight index swap contracts, has dropped from about 90% on Wednesday to around 70%.
UBP investment fund manager Zuhair Khan pointed out that the previous rise in bank stocks was based on expectations that rising long-term loan rates would widen net interest margins. &#34;In my view, this expectation has been overly reflected,&#34; he said. &#34;As long as the magnitude or timing of rate hikes falls short of expectations, bank stocks should correct.&#34;

Due to the United States imposing a 24% tariff on Japan, market concerns about the impact on the Japanese economy have led to a sharp decline of over 7% in the benchmark index of Japanese bank stocks, marking the largest drop in 8 months. Investors are betting that the Bank of Japan may pause interest rate hikes, with Mitsubishi UFJ and Mizuho Financial's stock prices once plummeting over 8%. Analysts point out that the attractiveness of bank stocks has sharply decreased due to the decline in interest rate hike expectations, and the overall stock market will be significantly affected