Who will police the bond vigilantes?

Adding to pressure on bond markets were comments from Bank of Japan officials ahead of the September 17-18 meeting, with Governor Kazuo Ueda vowing to continue raising rates. Hajime Takata, another board member known for his hawkish views, also called for a faster pace of interest rate hikes.

Meanwhile, other central banks took action on Wednesday to tame cost-of-living pressures. The New Zealand dollar slumped 1% to $0.58375 after a widely-expected 25-basis-point rate hike from the Reserve Bank of New Zealand was coupled with a more dovish statement.

Equities have taken fright as financial conditions tighten, with MSCI's broadest index of Asia-Pacific shares outside Japan .MISX00000PUS tumbling 1.7% as South Korea's KOSPI .KS11 skidded more than 3.5%. The Nikkei 225 .N225 was down 2.7% while S&P 500 e-mini futures EScv1 edged 0.1% lower.