Tokyo, Japan (BBN) – Japanese stocks sold off in late-morning trade on Wednesday, after an apparent North Korea missile test that reports said failed.

Reuters, citing Yonhap news agency, reported the isolated nation in the Korean peninsula may have conducted a missile launch with a US military spokesman adding that “a missile appears to have exploded within seconds of launch”, reports CNBC.

The benchmark Nikkei 225 was down 2.01 per cent at 11am HK/SIN, while the Topix index slipped 1.89 percent.

The yen traded at 111.57 to the dollar, weakening from an earlier session high of 111.41, but relatively stronger than levels above 113.00 reached in the previous week.

Across the Korean Strait, the Kospi index fell 0.8 percent, while the Korean won traded at 1124.50 to the dollar, weakening from an earlier high of 1121.26.

South Korean defense stocks advanced, beating the broader benchmark, following the report on North Korea. Shares of Firstec rose 3.6 per cent, Speco was up 0.2 per cent and Victek advanced 0.6 per cent.

Meanwhile, Japanese defense names were broadly lower.

Shares of Kawasaki Heavy Industries fell 3.92 per cent, Komatsu fell 2.08 per cent and ShinMaywa Industries was down 1.78 per cent.

Earlier, the Bank of Japan released its January minutes, showing that board members rejected the idea of raising 10-year government bond yield target in the future to match expected gains in US Treasury yields, Reuters reported.

Japan’s exports in February rose 11.3 per cent from the previous year, the third straight month of increases signalling the recovery in global demand. Imports rose 1.2 per cent in February on-year.

Australia’s S&P/ASX 200 shed 1.59 percent, seeing heavy losses in its energy, materials and financials sectors.

Australia’s Big Four banks were hit hard, with shares of Australia and New Zealand Banking Group down 2.55 per cent, Commonwealth Bank fell 2.08 per cent, Westpac slipped 2.59 per cent and National Australia Bank was 1.77 per cent lower.

The Shanghai composite slipped 0.77 per cent and Shenzhen composite dropped 0.75 per cent.

Hong Kong’s Hang Seng index declined by 1.42 percent in morning trade.

“Investors may now get an answer as to just how much current stock valuations are actually dependent on the assumed boost from the Trump Administrations plans for fiscal stimulus, or whether recent gains have been mainly about improvements already evident in the US and other economies,” said Ric Spooner, chief market analyst at CMC Markets, in a Wednesday note.

US equities had the worst day of the year for stocks on Tuesday, as banks struggled with falling yields and over concerns that President Donald Trump faces legislative roadblocks in passing a healthcare overhaul.

The Dow Jones industrial average dropped 1.14 per cent to close at 20,668.01, the S&P 500 tumbled 1.24 per cent to end at 2,344.02 and the Nasdaq composite dropped 1.83 per cent to close at 5,832.53.

Since Trump’s presidential victory last November, there have been high expectations for deregulation, tax reform and an increase in fiscal spending.

But the Trump administration has indicated that healthcare reform would take precedence over tax reform.

House Republicans are expected to vote on repealing and replacing the Affordable Care Act on Thursday with the votes needed for passage in doubt.

The markets also noted comments from Cleveland Federal Reserve President Loretta Mester on Tuesday in the US that if economic data holds up she would support a reduction in the Fed’s $4.5 trillion balance sheet.s

During Asian hours, US crude fell 0.1 per cent to $48.18 a barrel, after it fell to its lowest since Nov 29 to settle at $47.34 during US hours on Tuesday.

Brent crude was flat at $50.94.

Late Tuesday in the US, the American Petroleum Institute reported a 4.53 million barrels build in crude stocks at the end of last week, nearly double the expected gain.

Spot gold was trading at $1,244.76 per ounce, up for its sixth consecutive session and near a three-week high.

The dollar index, which tracks the greenback against a basket of currencies, fell below the 100 handle to 99.833 at 11:12am HK/SIN.