Japan stocks slump on U.S. CPI data, reports of BOJ preparing for FX intervention

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TOKYO — Japanese stocks fell the most in three months on Wednesday, after overnight Wall Street losses on an unexpected rise in U.S. inflation data, while reports of the Bank of Japan apparently preparing for a currency intervention also weighed on sentiment.

The Nikkei share average dropped 2.95% shortly after markets opened and closed down 2.78% at 27,818, after the Nikkei newspaper reported that the BOJ conducted a rate check in apparent preparation for currency intervention amid sharp declines in yen.

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The broader Topix index closed 1.97% lower, in its worst day since June 13.

The U.S. Consumer Price Index report was a “negative surprise for the stock market,” said Masahiro Yamaguchi of SMBC Trust Bank, who added that the Nikkei could slip back below 27,000 on future Federal Reserve interest rate hikes.

Wall Street posted its biggest loss in two years after the U.S. CPI report showed August consumer prices edged up 0.1% despite consensus expectations for a decrease.

Markets are now fully pricing in a third successive rate hike of at least 75 basis points at the Fed’s next meeting and see a 34% probability of a highly aggressive 100 bps.

Technology stocks led the losses on the Nikkei, falling 2.59%, after the Philadelphia semiconductor index slid 6.18% overnight.

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SoftBank Group Corp fell 4.38% and chipmaking equipment manufacturer Tokyo Electron slipped 3.69%.

“The selloff in high-priced tech stocks in Japan seems to be connected [to the overnight U.S. losses],” a market participant at a domestic financial institution said.

Of the Nikkei’s 225 constituents, 208 declined, 15 advanced, and two traded flat.

Some travel-related companies gained amid expectations that Japan will further ease COVID-19 visa restrictions for tourists.

Department store giant Takashimaya Co Ltd rose 0.48%, East Japan Railway Co gained 0.23%, and airline ANA Holdings Inc increased 0.07%. (Reporting by Sam Byford and Tokyo markets team; Editing by Rashmi Aich)

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