TOKYO: Japan’s Nikkei share average retreated from a 34-year high on Wednesday, weighed by Wall Street’s sharp declines overnight, however, a weaker yen and hot investor demand are expected to push the benchmark back toward fresh peaks in the near-term.

The index climbed to 38,010 on Tuesday, not far from the record intraday high of 38,957.44 in December 1989.

It closed at its highest since January 1990. It has risen 12.5% so far this year. The Nikkei was down 0.84% at 37,646.95 by the midday break.

The broader Topix had slipped 1.43% to 2,574.55. Wall Street’s main indexes tumbled overnight after a higher-than-expected consumer inflation reading pushed back market expectations of imminent interest rate cuts, driving US Treasury yields higher.

“The Nikkei needed to take a pause to slow down its pace today after it outperformed market expectations to rise so sharply,” said Ikuo Mitsui, fund manager at Aizawa Securities.

“But there is still a demand from investors who had cut weightings of Japanese stocks in the past. Many investors want to build positions of Japanese shares and they target large and liquid stocks.”

Japan’s Nikkei cruises to 34-year peak, briefly breaching 38,000 range

A weaker yen will also a positive factor for the Nikkei. The yen overnight fell to 150 yen against the dollar for the first time since Nov. 17.

Technology investor SoftBank Group fell 3.14%, becoming the biggest drag on the Nikkei, after shares of British chip designer Arm Holdings slumped 14%.

Staffing agency and publisher Recruit Holdings lost 2.7% and air-conditioning maker Daikin Industries fell 2.4%. Chip related shares rose, with Tokyo Electron and Advantest, rising 0.83% and 1.58%, respectively.

Uniqlo-brand clothing store operator Fast Retailing rose 1.32% to give the biggest support to the Nikkei.