TOKYO: Japan’s Nikkei share average tumbled more than 2% on Thursday, as chip-related stocks joined a global sell-off in the sector, while a strengthening yen weighed on automakers and other exporters.

The Nikkei closed 2.36% lower at 40,126.35, after falling earlier in the day to 40,104.22 - its lowest since July 2. A week earlier, it had jumped to a record high of 42,426.77.

Volatility spiked, hitting the highest level since May 9 at one point.

Chip-making-equipment giant Tokyo Electron was the biggest drag on the Nikkei, slumping 8.75%. Peer Disco was the biggest percentage decliner, dropping 8.83%.

The outsized drag from tech was clear in the relative performance of the broader Topix index, which fell 1.6%. A sub-index of growth shares slid 2.04%, while a value share gauge lost 1.18%.

US chip shares sold off sharply overnight, with the Philadelphia SE Semiconductor Index shedding 6.81% after a report that the United States was mulling tighter curbs on exports of advanced semiconductor technology to China.

Remarks from Republican presidential nominee Donald Trump saying key production hub Taiwan should pay the United States for its defence then deepened the rout.

Among the Tokyo Stock Exchange’s 33 industry groups, precision machinery was the worst performer, dropping 3.58%, followed by machinery, which lost 3.48%, and electric machinery, which slid 3.4%.

Disco was due to report its financial results after the market close, marking the start of the tech earnings season in Japan.

“From next week, when the earnings season properly kicks off, we should see some differentiation in stock performance,” said Maki Sawada, a strategist at Nomura Securities.

Elsewhere, the transport equipment sector declined 3.17%.

The yen has surged from as low as 161.81 per dollar on July 10 to as high as 155.375 on Thursday, amid several rounds of what appears to have been official Japanese intervention. A stronger yen reduces the value of exporters’ overseas revenues.