There is an ongoing meltdown in Asian stock markets spearheaded by Japan, as of this writing.
charts from Bloomberg
Before I get “I told you so” quips from perma bears, the reason this has been happening, according to media, has been principally about nuclear safety issues and hardly about debt or other mainstream issues.
According to the Los Angeles Times,
Panic selling looked like it was spreading across Asian financial markets on Tuesday after Japan warned of rising meltdown risk at the crippled Fukushima nuclear reactor complex.
The Japanese stock market’s Nikkei-225 share index was down a stunning 1,275 points, or 13.3%, to 8,344 at about 9 p.m. PDT, with about two hours to go in the trading session.
Of course, because of the state of panic, many other chain effects such as the impact on fiscal conditions or credit (default risk) concerns or economic growth will also be attributed. It's people instinct to add causal linkages, even if they are irrelevant, mostly for social signaling purposes (intellectual strawmen).
Let me add that perhaps fears of contagion from radiation leaks may have also affected Japan's closest neighbors which may have also prompted for a domino effect dynamic throughout the region.
So yes while we may be seeing a blackswan moment (low probability, high impact event) triggered by nuclear safety issues (which apparently no one has seen or predicted), for me this looks more like a knee jerk reaction rather than a strong case for structural reversal.
Here’s my guess, after Japan has expanded their engagement on their version of a Quantitative Easing (QE), expect the US to shift rhetoric from the farcical “exit” strategies to QE 3.
Japan’s disaster has just given the US Federal Reserve a crucial excuse or justification to undertake extensions of their money printing operations or ‘credit easing’ policies.
While I am not sure about the ECB or BoE, I am inclined to think that they might join the bandwagon too.
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