Japan's benchmark Nikkei index plunged by over 5 percent in Thursday trading, further erasing recent gains. The sell-off in Tokyo has been worrying investors who fear a correction is imminent after weeks of record highs in markets around the world.
China will take "counter-measures" after US President Donald Trump's raised tariffs on $200 billion of Chinese imports. Fears of escalation hit global stocks markets, which waver nervously awaiting a concrete response.
Japan pushes the Chinese aside for the first time since China became the world's second-biggest stock market in 2014. It is a sign of the escalating trade tensions with the US and a general slowing of growth.
As its society overall ages, China plans to scrap its one-child policy. Other Asian nations also face the challenge of demographic change.
Japan's economy grew more than expected in the second quarter, helped by strong household and business spending and a recovery from an earlier contraction. But global trade tensions loom as a major risk to the outlook.
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