Japanese stocks declined, with the Topix set to erase its gain for the year, after the U.S. labeled China a currency manipulator, further escalating the trade war between the world's two largest economies.

The electronics and telecommunications groups were the biggest drags on the benchmark stock gauge, as all industry groups declined. The Topix is now down about 1.1% this year and the worst performer among 24 developed markets tracked by Bloomberg.

Topix -1.9% at 1,478.03 as of midday break in Tokyo. Nikkei 225 -2.1% at 20,299.69.

Yen -0.1% at 106.10 per dollar after strengthening as much as 0.4%. Electronics makers: Sony -1.5%, Nidec -3.3%, Murata Manufacturing -3.1%.

Source : Bloomberg