TOKYO: Japan’s Nikkei share average erased early gains to trade lower on Thursday, as automakers and banking stocks fell after the Federal Reserve’s signal to end its tightening cycle boosted the yen and pushed the US Treasury yields lower.

The Nikkei slipped 0.38% to 32,801.15 by the midday break, after opening 0.32% higher to track overnight Wall Street gains.

The Dow Jones industrial average hit its first record closing high since January 2022 after the Fed flagged its interest rate-hiking policy is at an end.

The Japanese yen traded up 0.63% to 141.97, while the US benchmark 10-year yield extended declines in Asian hours after hitting its lowest since August overnight.

A stronger yen tends to hurt exporter shares as it decreases the value of overseas profits in yen terms when firms repatriate them to Japan.

“Japanese equities fell due to the yen’s strength and falling Treasury yields. The Fed decision was more dovish than expected,” said Takehiko Masuzawa, head of trading, Phillip Securities Japan.

The broader Topix fell 1.11% to 2,328.67.

The Auto and autoparts sector lost 3.48% to become the worst sector among the Tokyo Stock Exchange’s 33 industry sub-indexes. Toyota Motor lost 3.67% to become the biggest drag on Topix.

Honda Motor fell 4.04%.

Japan’s Nikkei tracks Wall Street higher, chip shares shine

The banking sector slipped 3.44% with Mitsubishi UFJ Financial and Sumitomo Mitsui Financial Group losing 3.5% and 4.33%, respectively.

The insurance index was down 3.27%, “It was natural that those sectors fell after the Fed’s decision but all the bad market cues were out so far. Investors are now eyeing the Bank of Japan’s policy meeting,” said Masuzawa.

The BOJ is scheduled to hold its two-day policy meeting starting Monday.

Recruit Holdings jumped 6.62% after the staffing agency announced a buy back of up to 200 billion yen ($1.41 billion) worth of its own stocks.