Asian equities fell the most since July this week as Chinese manufacturing data missed estimates and amid concern that the U.S. might begin to unwind stimulus. Japanese shares had the largest one-day plunge since March 2011.
The biggest drop in Japanese shares since the 2011 earthquake erased $314 billion in market value, shaking bulls who pushed the Topix Index to five-year highs and highlighting their vulnerability to shocks at home and abroad.
Asian stocks sank, with the regional benchmark index headed for the biggest drop since September 2011, as Japanese shares plummeted after preliminary China manufacturing data unexpectedly signaled a contraction and the yen strengthened.
The Bank of Japan maintained its unprecedented plan to boost money supply at a policy meeting today, and predicted inflation will almost match its target in two years even after a report highlighted deflation’s grip.
Japanese Prime Minister Shinzo Abe’s plan to beat deflation with money printing by the central bank is bound to fail as the root causes are more structural, said Eisuke Sakakibara, a former Ministry of Finance official.
Bank of Japan board members forecasting an end to more than a decade of deflation may need to add to an already unprecedented monetary stimulus plan should consumer prices fail to align with their projections by October.
Japan’s government will struggle to halt the yen’s advance toward a record high because the U.S. probably won’t support any intervention to weaken it, said Eisuke Sakakibara , formerly Japan’s top currency official.