Japan’s Nikkei closed sharply lower as yen rose

Japan’s Nikkei index fell from a record high to close sharply lower on Thursday amid a sell-off in chip-related stocks as the yen rose amid growing expectations for a policy adjustment by the Bank of Japan.

The index closed down 1.23%, the largest daily decline since January 26, at 39,598.71 points after hitting a record high of 40,472.11 points, tracking Wall Street’s gains on Wednesday night.

The broader Topix index also reversed its course, falling 0.44% to 2,718.54 points.

“Investors have renewed their expectations that the Bank of Japan will end its negative interest rate policy as early as this month,” said Seiichi Suzuki, chief stock market analyst at Tokai Tokyo Intelligence Laboratory.

Momentum is building for the Bank of Japan to consider ending negative interest rates as soon as this month, with annual wage negotiations likely to result in big pay rises for the second year in a row.

Junko Nakagawa, a member of the Board of Directors of the Bank of Japan, said that the economy is making steady progress towards achieving the bank’s inflation target of two percent.

Her comments came on the heels of a report by Japan’s Jiji Press on Wednesday that some members of the Bank of Japan’s board will likely say raising negative interest rates is reasonable at a policy meeting this month.

This speculation led to the yen rising to its highest level in a month against the dollar.

Tokyo Electron shares of chip-making equipment fell 3.89%, putting the greatest pressure on the Nikkei index. Advantest, a manufacturer of chip testing equipment, lost 4.48%.

Financial sector stocks rose, as shares of Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group rose 0.53 percent and 1.65 percent, respectively.