Asian equities sank Wednesday, tracking a sell-off on Wall Street, as a forecast-topping US inflation report dealt a hefty blow to hopes for an early interest rate cut.

The dimming prospects of a dovish turn by the Federal Reserve also sent the dollar surging against the yen, forcing Japanese officials to warn they would intervene in forex markets to support the country's currency.

Expectations for a rate cut have been doused in recent weeks by a series of strong indicators -- particularly on the economy and jobs -- while several monetary policymakers warned they want to see more data before shifting.

However, stocks continued to push higher in that time, with analysts saying the Fed had indicated it is still on course to cut this year, even if not as much as previously hoped. 

A small downward revision last week to inflation figures for the final few months of 2023 added to the upbeat mood.

But Tuesday's figures showing the  consumer price index and core prices eased less than expected came as a severe blow, leading investors to re-evaluate their outlook for rates this year.

Eyes are now on producer price data due at the end of the week.

All three main indexes on Wall Street fell more than one percent, with the Dow and S&P 500 coming down from around record highs.

US Treasury yields jumped and the so-called "fear gauge" VIX rose at its fastest clip since October.

The "CPI report caught a lot of people off guard", Chris Zaccarelli, of Independent Advisor Alliance.

"Many investors were expecting the Fed to begin cutting rates and were spending a lot of time arguing that the Fed was taking too long to get started -- not appreciating that inflation could be sticky and not continue down in a straight line."

Saxo's Redmond Wong added: "The hot CPI report has priced out a March rate cut, now seen with only 10 percent odds."

The "May rate cut probability has also dropped to less than 40 percent from around 70 percent previously and the first rate cut is only seen in June".

And Stephen Innes at SPI Asset Management called it "a bitter pill".

"Suppose the other top-tier data released this month shows a hotter trend similar to the CPI report. In that case, it's unlikely that the Federal Reserve will cut interest rates in May."

Asian traders ran for cover, with Hong Kong in retreat as it reopened after an extended break for the Lunar New Year, while Tokyo, Sydney, Singapore, Seoul, Wellington and Manila were also well down.

The dollar held on to most of its gains against its peers, with its movements against the yen of particular interest to investors after it jumped around one percent to sit back above 150 for the first time since November.

However, officials in Tokyo said they were keeping a close eye on developments and were ready to step in to support their currency.

"Some of the recent rapid moves are in line with fundamentals, but some are clearly speculative. I think the latter aren’t desirable," said vice finance minister for international affairs Masato Kanda on Wednesday.

"Authorities are ready to respond 24 hours a day, 365 days a year."

Those remarks were echoed by Finance Minister Shunichi Suzuki.