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Japanese stocks slid on Tuesday after US President Donald Trump's new threat to impose a 10 per cent tariff on $200 billion of Chinese goods, escalating a tit-for-tat trade war with Beijing.
The Nikkei share average fell 0.9 per cent to two-week lows of 22,482.89, slipping further from last week's high just above 23,000. The broader Topix declined 0.7 per cent to 1,758.35, hitting its lowest levels since June 1.
Trump's remarks came just days after he said on Friday he was pushing ahead with a 25 per cent tariff on $50 billion worth of Chinese products, which immediately prompted Beijing to respond in kind.
“Concerns about trade frictions between the US and China intensified after Trump's comments,” said Hideyuki Ishiguro, senior strategist at Daiwa Securities.
“Although the latest data showed Japanese exports were strong in May, if China's exports to the United States slow down, that would slow down capital spending in China,” he said.
With Washington and Beijing appearing increasingly headed toward open trade conflict, investors dumped shares of companies geared to global trade and Chinese demand.
Shin-etsu Chemical fell 2.9 per cent to nine-month lows, having fallen almost 15 per cent over the past month. Construction equipment maker Komatsu fell 1.6 per cent, hitting an 8-1/2-month low.
Despite the spectre of intensifying protectionism, the current strength of the global economy is also prompting some investors to flock to shares that are perceived to have limited exposures to a trade war.
Tokyo Disney Resort operator Oriental Land Corp hit a record high while Central Japan Railway scaled 3-1/2-year peaks, before giving up gains on profit-taking. They both ended morning trade down 0.2 per cent.
Flea market app operator Mercari Inc's started trading at ¥5,000, 66 per cent above its IPO price of ¥3,000 in its Tokyo stock market debut, underscoring strong investor appetite for a rare Japanese unicorn.
“We have a rush of IPOs, a total of 11 by the end of month. While major shares are being hampered by trade concerns, investors' focus could shift to start-up shares,” said Masayuki Doshida, senior market analyst at Rakuten Securities.
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