TOKYO: Japan’s Nikkei share average fell more than 3% in morning trade on Thursday as the yen appreciated further and index heavyweights tumbled, following the Bank of Japan’s (BOJ) historic monetary policy meeting the previous day.

The BOJ raised interest rates on Wednesday to levels unseen in 15 years and announced details on how it will reduce its huge bond buying.

“It appears the market didn’t judge the BOJ’s move to be too hawkish, and that the policy uncertainty overhang has been removed,” said David Chao, global market strategist, Asia Pacific (ex-Japan) at Invesco.

The BOJ’s decision has further supported the yen, with the dollar falling nearly 1% against the Japanese currency during early trading hours on Thursday.

The currency moves weighed on the Nikkei, which briefly declined over 3% to touch a one-week low.

The benchmark index was down 2.58% at 38,094.24 by the midday break, while the broader Topix fell 3.12% to 2,707.07.

Shares of export-related companies, which tend to suffer from a stronger yen when firms repatriate revenues, were among stocks taking the biggest hit.

“As soon as the yen rose below 150 to the dollar, the market got concerned about the upside of local firms’ profit outlook,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

Automakers underperformed, with Toyota Motor down 5.3% after declining 7% earlier in the session.

Japan’s Nikkei rebounds in broad-based buying

The transport equipment sector fell 5.1%. Other big name shares also stumbled, including Uniqlo parent firm Fast Retailing and Sony Group Corp, both down about 3%.

A cocktail of factors have helped the Japanese currency climb from 38-year lows of 161.96 hit at the start of July to hover around its current level around 149.635, putting downward pressure on Japanese stocks.

“Japanese equities are likely to remain volatile in the short term until we see a stabilization in the USDJPY (dollar/yen),” UBS SuMi TRUST Wealth Management CIO wrote in a note.