Japanese shares fall sharply as broad sell-off bites Thursday 06.00 BST. Japanese stocks fell sharply on Thursday afternoon, with the Nikkei 225 dropping as much as 4.2 per cent as the yen gained strongly against the US dollar. The index had been comfortably in positive territory in early trading, rising as much as 1.8 per cent. But a broad afternoon sell-off took in all but three stocks. No sector was spared, from banks to technology groups. Tokyo Electric Power dropped 9.4 per cent, Sharp fell 8.8 per cent, while Mitsubishi Motor sank 11.5 per cent. The yen gained from 103.6 per dollar to 102.6 per dollar in a matter of hours, while yields on Japanese government bonds tracked lower as investors sought refuge in credit markets. Yields on 10-year JGBs hit 1 per cent for the first time in a year in the opening minutes of Tokyo trading, but fell back to 0.88 per cent by the middle of the afternoon. Asian shares outside of Japan also retreated after Federal Reserve Chairman Ben Bernanke's comments that monetary stimulus could be scaled back, while Hong Kong shares were hurt by China's slowing manufacturing activity. The flash HSBC Purchasing Managers" Index for May fell to 49.6 from 50.4 in April, the first contraction in 7 months. The Hang Seng index, the ASX 200 and the Taiwan Weighted index all dropped 1.7 per cent, while the Shanghai Composite was flat. Mr Bernanke said the Fed could start slowing the pace of its $85bn-a-month asset purchases "in the next few meetings" but only if the employment market showed sustained improvement. The minutes of the Fed's last meeting, revealed shortly before Mr Bernanke spoke, showed a "number" of officials were ready to start tapering off the central bank's third round of quantitative easing as early as June. The comments hurt sentiment across the region. "Slightly firmer hints of possible scaling back of asset purchases are negative for EM [emerging markets] sentiment as they would limit flows into EM assets," Dariusz Kowalczyk, senior economist at Crédit Agricole, said in a research note.