“The ground right now is so unstable, and there’s so much anxiety,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., which has $453 billion under management. “We saw an early rally, but people are just bottom- fishing. There are no real reasons to stem drops right now.”

Eoin Treacy's view

Following a steep 20% decline since late November, it is perhaps not so surprising that sentiment towards the Japanese stock market is despondent at best and dismal at worst. The simultaneous strength of the Yen is symptomatic of deleveraging as carry trades were unwound and has less to do with domestic considerations. However it has been a headwind for stocks. 

Today’s action looked climactic with the Nikkei-225 falling to test the 16,000 level which also represents the upper side of the 2013/14 range. Potential for a reversionary rally has improved and futures on the Index have bounced with Wall Street. The larger question is how well the lows will hold once the short-term oversold condition is unwound. 

The Topix 2nd Section, which we have long regarded as a lead indicator, also has scope for a reversionary rally. However, the medium-term trend has lost consistency with downtrend characteristics now evident. A sustained move above 4750 will be required to question medium-term supply dominance.