Plunging Nikkei brings $40m vega losses to Japan dealers

Losses manageable now but if the Nikkei goes under 13,000, "there will be panic"

Japan-based equity derivative dealers are facing volatility-linked losses of about $40 million after emerging market panic spread to Asia's second largest economy, partially reversing last year's bull run and driving down the benchmark Nikkei 225 index by 13% in little over a month.

After a profitable 2013 for equity derivatives houses in Japan that saw the Nikkei 225 rise more than 70%, and a steady flow of equity-linked uridashi bond issuance, dealers are experiencing a more difficult start to