The Nikkei has experienced its largest daily loss in five months during trading today (January 14th) after the yen rose in comparison to the dollar.
Japanese stocks were around three per cent lower after the Asian currency hit a new four-week high against the greenback. A weak yen is typically good for exporters, like many of the Nikkei's largest companies.
A surprisingly weak jobs report released in the US towards the end of the week has proved damaging to the strength of the dollar in comparison to many other global currencies.
In turn, this has resulted in the Nikkei sustaining heavy losses. After the index rose by around 58 per cent in 2013, outstripping the gains made by the Dow Jones and the FTSE 100 with ease, the Nikkei was 2.3 per cent down over the course of last week.
It is not just the Japanese stock market that took a hit today following the yen's gains against the dollar, as the Australian index was also down by 1.5 per cent during today's trading session.
"The gradual widening in the rate differential between the US and Japan should also encourage Japanese investors to invest in foreign bonds," Nomura Securities said in a note.
"The expected gradual rise in global yields, while Japanese yields are expected to remain relatively low thanks to the [Bank of Japan's] JGB investment, should also influence foreign investment in the Japanese market."
MSCI's broadest index of Asia-Pacific shares lost ground following the broad gains it made in yesterday's session. It was 0.6 per cent down at the end of the day today, cancelling out some of the 0.8 per cent increase recorded yesterday.
Wall Street has also got off to a slow start to the new year, echoing the difficulties that have been faced by the Nikkei in the last couple of weeks, with investors keen to wait and see how the land lies before deciding where to place their money during 2014.
But the price of gold has been rising and hit a new one-month high yesterday following the news that the Federal Reserve in the US will not be introducing fresh stimulus.
Learn about the Asian markets and CFD trading at City Index.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.