The benchmark Nikkei’s rally, after the market’s biggest single day rout since the 1987 Black Monday crash

Japanese stocks rebounded sharply on Tuesday from the previous session’s massive sell-off and double-digit losses as Fed comments and data gave investors pause in their concerns over equity valuations and a possible U.S. recession.

The benchmark Nikkei’s rally, after the market’s biggest single day rout since the 1987 Black Monday crash, came as the yen reversed its gains, suggesting the carnage in yen-funded global carry trades too was easing.

In a volatile day of trading, the Nikkei closed up 10.2% at 34,675.46, after plummeting 12.4% on Monday. The index finished up 3,217.04 points, notching its biggest ever single-day point gains. It was also the Nikkei’s biggest daily percentage gain since October 2008.

The broader Topix jumped 9.3% to 2,434.21.

Investors had been shaken by last week’s plunge in global stock markets, U.S. recession risks, and concerns investments funded by a cheap yen were being unwound, triggering a sell-off in Japanese equities on Monday.

Traders now seemed to be reconsidering the severity of their initial response, buying back shares on the dip.

Fundamentally, nothing significant has changed for the Japanese economy. It is the unwinding of the carry trade driving a lot of the momentum sells, according to Ray Sharma-Ong, head of multi-asset investment solutions for Southeast Asia at abrdn.

The Nikkei rally helped lift other Asian stock markets. Overnight, safe-haven U.S. yields too had advanced from lows in a sign the panic was abating.

But uncertainties remained, with analysts pointing to the possibility of more volatile market moves in the near-term.

We are not yet sure if this is just a breather between water-boardings or there is more pain to follow, according to Matt Simpson, senior market analyst at City Index.

Japanese officials meanwhile scrambled to calm markets, with Prime Minister Fumio Kishida urging caution and calling on market participants to stay calm.

An emergency trilateral meeting of the Ministry of Finance, Financial Services Agency and the Bank of Japan was held at 0600 GMT to discuss markets.