Nikkei slides more than 2% on Fed and earnings fears

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The Nikkei 225 lost 2.12 per cent last night after investors worried about Japanese companies’ earnings and the prospect of the Federal Reserve scaling back quantitative easing.

The index closed 297.22 points down at 13,752.94 as sentiment took a hit from expectations of the Fed starting to taper QE in the coming months and the impact of a stronger yen on the country’s exporters.

A raft of healthy economic data in the US has bolstered the belief that the Fed will start to scale back its $85bn-a-month bond-buying programme. A poll by Reuters found that almost two-thirds of economists it surveyed expect this to begin in September.

Meanwhile, the yen has strengthened against the dollar after finance minister Taro Aso refuted speculation that prime minister Shinzo Abe is considering a corporate tax cut. This rumour had originally caused the yen to weakened.

A stronger yen would hurt the earnings of Japan’s exporters, with consumer electronics makers Sony and Panasonic, car manufacturer Nissan and tractor maker Kubota, which receives significant sales from the US, being among the firms ending the session down.