The Nikkei 225 dropped 1.02% to close at 38,488 on Thursday, while the broader Topix Index declined 0.58% to 2,792, ending a three-day rally as rising geopolitical risks dampened investor sentiment. Market jitters intensified amid reports that the US is preparing for a potential strike on Iran, heightening fears of broader instability in the Middle East.
The selloff followed the US Federal Reserve’s decision to leave interest rates unchanged and maintain a cautious stance, citing inflation risks tied to President Donald Trump’s tariffs. On the domestic front, investors turned their attention to upcoming inflation data, which could shape the Bank of Japan’s policy trajectory. The BOJ recently held rates steady and reiterated a gradual approach to tightening. Notable decliners included Advantest (-2.4%), Disco (-3.3%), Tokyo Electron (-3%), Sony Group (-2.5%), and Toyota Motor (-1.7%).
