Japan stocks lead declines in Asia after hotter-than-expected U.S. inflation data sends Wall Street lower

Japan stocks led declines in Asia-Pacific markets after hotter-than-expected U.S. inflation data sent Wall Street tumbling overnight.

U.S. consumer price index climbed 3.1% on a 12-month basis and 0.3% for the month. Economists polled by Dow Jones expected the CPI to have increased by 0.2% month over month in January and 2.9% on an annual basis.

Core prices, which exclude volatile food and energy components, rose 0.4% month over month and 3.9% from a year ago. Core CPI was expected to have increased 0.3% in January and 3.7% from a year earlier, respectively.

Hong Kong’s Hang Seng index plunged 0.58% as the city returns to trade after the Lunar New Year holiday.

Japan’s Nikkei 225 retreated from 34-year highs, falling 0.78%, while the Topix saw a larger loss of 1.21%.

The Nikkei had rallied about 3% to breach the 38,000 mark briefly on Tuesday. It last touched that level in 1990.

Japan’s top currency diplomat Masato Kanda said that “recent movements in the foreign exchange market have been rapid” with regard to the yen, and authorities are watching these “with a high sense of urgency,” according to Reuters.

South Korea’s Kospi dropped 1.17%, with heavyweight Samsung Electronics losing nearly 2%, while the small-cap Kosdaq fell 0.81%.

In Australia, the S&P/ASX 200 slid 1.05%, extending its losing streak to a third day.

Overnight in the U.S., the hotter-than-expected inflation data saw all three major indexes lose ground, with the Dow Jones Industrial Average falling 1.35%, clocking its worst session since March 2023 on a percentage basis.

The S&P 500 slid 1.37%, while the Nasdaq Composite fell 1.8% to settle at 15,655.60.

— CNBC’s Lisa Kailai Han and Brian Evans contributed to this report