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A perfect storm of yen strength, a spike in Japanese government bond yields and new evidence of weakness in China’s economy were behind a major sell-off Thursday in Japan’s equity markets, said experts.

The benchmark Nikkei 225 closed down 7.3 percent in a session that saw it rise 2 percent in early trade only to reverse direction and fall sharply. The broader Topix finished 6.8 percent lower.

“Almost everything went wrong during the day – the bond market had a bit of a crash, China PMI data, and the yen is stronger. The market is really overheated, all it’s looking for is a trigger,” Nicholas Smith, Japan strategist at CLSA told CNBC.

Following the sell-off in U.S. Treasurys overnight, Japan government bond (JGB) prices dived, forcing the yield on the 10-year JGB to 1 percent earlier in the day – the highest level in a year – spooking investors.

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