Over the weekend, Warren Buffett's "abandonment" of Apple sent shockwaves through the global market. This, coupled with weak economic data, retail investor panic, and increased expectations for a Federal Reserve rate cut in September, has triggered a "butterfly effect" that directly sparked a financial hurricane in Japan across the ocean.

On Monday, global stock markets collapsed, with the Japanese market leading the plunge and triggering circuit breakers multiple times. The Nikkei 225 and the Topix both closed down 12%, with the latter recording its largest single-day drop since 1987, just a hair's breadth away from entering a technical bear market.

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This plummeting market was further exacerbated by massive forced sales by retail investors. Some analysts believe that such large-scale selling is due to retail investors being forced to sell stocks they purchased on margin.

All this panic seems to be inextricably linked to Buffett.

Buffett's "Hint" - Japanese Stock Investors Seem to Have Understood

Buffett first disclosed his Japanese stock holdings in August 2020. Since then, the share prices of the five major trading houses have risen nearly fourfold on average (calculated in yen), igniting the Japanese stock market almost single-handedly.

But why did the "abandonment" of Apple set off the Japanese stock market? These seemingly unrelated events are entangled with many recent details:

1. Influenced by weak economic data, the market's expectation that the U.S. economy will remain strong over the next 12 months has dropped to a seven-month low.

2. Amid intense market speculation about whether the U.S. economy is slowing down, the U.S. non-farm employment data dealt a heavy blow to the market. The unemployment rate triggering the "Sam Rule" is seen as a significant sign that the U.S. economy has fallen into a recession.

3. The negative impact of weak employment data was further magnified by expectations of a Federal Reserve rate cut in September, combined with the recent interest rate hike by the Bank of Japan, causing the market to panic.At this very moment, Warren Buffett has significantly reduced his top holding in Apple, and his cash reserves may have approached a historical high of nearly $200 billion. This sends another signal to an already anxious market: there will be cheaper entry opportunities in the future, not now.

According to media reports, veteran analyst Jesper Koll commented that Buffett's move seems to imply that in the global financial market, everything starts in the United States and ends in the United States. With the risk of a U.S. economic recession sharply increasing, the dollar's appreciation cycle is about to end. Coupled with Japan's heavy economic and financial dependence on the United States, its proud overseas market cannot exclude the United States.

Therefore, what the Japanese market needs to do now is not to fight against the cycle. And judging from today's performance of the Japanese stock market, investors seem to have gotten the message.

The heavy hit to the Japanese stocks may only be the beginning. Whether it will intensify or stop here depends on what will happen next in the United States.