HONG KONG, June 13: Asian stocks were in deep trouble again Tuesday, led down by Tokyo, with nervous investors bracing for key US price data as the US central bank warned anew of the dangers of inflation.

Dealers said the reverse may have started out in early May as profit-taking in markets at record or multi-year highs but it now looks to be something more serious -- a sustained sell-off gathering a momentum of its own.

Tokyo, one of recent best performers, highlighted that worry, falling 4.14 per cent for the worst single-day loss since the September 11, 2001 attacks on the United States. That leaves the market down 13.1 per cent for 2006 and down 19 per cent from its early April peak.

Sentiment was additionally hit by Bank of Japan governor Toshihiko Fukui's surprise admission that he had invested in the fund of Yoshiaki Murakami, who was arrested last week on charges of insider trading.

“Compared with the US market, Tokyo share prices have risen much more in the past year, so once shares started to fall, the spiral of declines is much worse here,” said Masatoshi Sato, senior strategist at Mizuho Investors Securities.

All eyes are now on the US Federal Reserve, which appears increasingly ready to hike rates to head off inflation even if that means slower economic growth.

Hong Kong, down 2.48 per cent, was hit by the double whammy of Wall Street and Tokyo, its two most important leads, with some dealers talking of panic selling at one stage.

The market extended its losses ... as Japan's slump triggered panic selling. Investors have become over-sensitive ... on fears that the markets will see a further correction, said Kingston Lin, associate director at Prudential Bache Securities.—AFP