Shares in Japan sold off sharply on Monday as investors grappled with concerns over the global economy.
The Nikkei 225 plunged 3.01 percent to close at 20,977.11, as shares of index heavyweights Softbank Group and Fanuc plummeted 5.01 percent and 3.84 percent, respectively. The Topix index also fell 2.45 percent to finish its trading day at 1,577.41.
That followed a sell-off on Wall Street Friday, as an inverted yield curve stoked fears that an economic recession is on the horizon. Disappointing economic data released Friday out of Europe, coupled with an economic downgrade by the Federal Reserve, added to those concerns.
The spread between the 3-month Treasury bill and the 10-year note turned negative on Friday — the first time in more than a decade. Investors consider this to be a signal that a recession may be coming soon.
At present, the central bank balance sheets among the G3 economies — the U.S., Japan and the European Union — are "bloated," they said. As a result, the difference in yield between holding a long-term bond versus a series of short-term debt was suppressed.
"However, this should not detract from the fact that the slowdown across the developed markets is deepening. While the US economy still seems to be on firm footing, guarding against downside risks has become the Fed's main priority (as opposed to policy normalisation). The Fed's dovish pivot over the past few months should help to cushion slowdown risks," they said.