TOKYO: Tokyo stocks ended sharply lower Tuesday, as investors remain risk averse despite US attempts to settle nerves after the spectacular collapse of Silicon Valley Bank.

The benchmark Nikkei 225 index was down 2.19 percent, or 610.92 points, to close at 27,222.04, while the broader Topix index plunged 2.67 percent, or 53.45 points, to 1,947.54.

The dollar stood at 133.33 yen, against 133.22 yen in New York on Monday.

The collapse of Silicon Valley Bank on Friday, followed by Signature Bank days later, forced US authorities to immediately pledge support for other lenders and depositors.

The demise of SVB, which specialised in venture-capital financing mainly in the tech sector, was largely the result of the Fed’s sharp interest rate hikes aimed at quelling inflation, which hit securities hard.

The SVB debacle has “brought on the highest volatile market conditions of 2023 so far”, Stephen Innes of SPI Asset Management said in a note.

The effect reverberated throughout Japan’s financial sector, too, prompting banking shares to tumble.

Sumitomo Mitsui Financial Group nosedived 7.56 percent to 5,240 yen and Daiichi Life Holdings tanked 7.28 percent to 2,444 yen.

“A series of US banking failures strengthened the risk-averse mood, and investors took cues from the across-the-board sell-offs of financial shares in the US market,” IwaiCosmo Securities said in a note.

Tokyo stocks close lower after US lender’s failure

Among other shares in Tokyo, SoftBank Group plummeted 4.07 percent to 5,040 yen, Sony Group slid 2.75 percent to 11,285 yen and Toyota lost 2.95 percent to 1,809 yen.

Uniqlo operator Fast Retailing dropped 1.49 percent to 28,420 yen.