(Bloomberg) — Japanese stocks plunged for a second day on expectations for further monetary tightening in the country, exacerbating a global selloff following weak US economic data and tech earnings.
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The Topix index fell as much as 5.7%, the most since 2020, as the yen traded near its strongest since March to weigh on Japan’s export-oriented economy. Shares also dropped across Asia from South Korea to Hong Kong, with AI chipmaker SK Hynix Inc. tumbling 8.7%.
Meantime, Treasuries extended a rally in Asia, with the policy-sensitive two-year yields touching a 14-month low amid increased bets on rate cuts by the Federal Reserve following the central bank’s policy meeting on Wednesday. Swaps traders raised the number of reductions this year to three from two.
The broader risk-off tone came after data showed US weekly unemployment claims hit an almost one-year high while manufacturing shrank. The tech-led losses were inflicted by disappointing earnings outlook or results from industry behemoths such as Intel Corp. and Amazon.com Inc. The focus will now shift to the monthly jobs data later Friday.
What’s keeping investors on edge in Japan is the outlook for the nation’s central bank to hike rates further following its move earlier this week. The Bank of Japan’s big policy shift this week makes another interest rate hike highly likely in October and raises the potential for quarterly increases, according to a former executive director in charge of monetary policy.
“The recent strengthening of the Japanese yen coupled with tech sector weakness is poised to significantly impact the Asian stock market,” said Manish Bhargava, a fund manager at Straits Investment Holdings in Singapore. “Japanese exporters are particularly vulnerable to the yen’s appreciation, as it erodes the value of their overseas earnings.”
The MSCI Asia Pacific Index declined as much as 3.1%, the most in over two years, with tech and industrial companies among the top losers.
The S&P 500 and Nasdaq 100 futures also slid in Asia, compounding Thursday’s declines…
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