TOKYO: Japan’s Nikkei share average fell more than 4% on Wednesday, as chip-related stocks followed AI darling Nvidia lower and soft US manufacturing data reignited fears of a hard landing for the economy.

The Nikkei closed 4.24% lower at 37,047.61, marking its lowest close since Aug. 15 and biggest decline since Aug. 5. The broader Topix fell 3.65% to 2,633.49.

“Today’s decline was a reaction to the sharp recovery from the big losses in mid-August,” said Tomochika Kitaoka, chief equity strategist at Nomura Securities.

“The market has turned cautious about the state of the US economy and will remain cautious until the non-farm payrolls data due on Friday.” The Nikkei fell more than 12% to 31,458.42 on Aug. 5 in its biggest decline since Black Monday amid US recession fears and a sharply stronger yen.

On Wednesday, a stronger yen also weighed on local equities, many of which are exporters.

“What is different now from then is that the yen is no longer on short positions. Back then, the yen rose as investors unwound carry trade,” Kitaoka said.

Wall Street closed sharply lower on Tuesday, with Nvidia tumbling 10% as investors reined in their enthusiasm about artificial intelligence.

Market sentiment was also hit as Institute for Supply Management data showed US manufacturing remained subdued.

In Japan, chip-related giants tracked Nvidia lower, with Tokyo Electron and Advantest shedding 8.55% and 7.74%, respectively.

Bucking the trend, Nitori Holdings, which imports most materials for furniture and home interior goods, rose 2.56%.

Fuji Soft jumped 7.36% after US buyout fund Bain Capital said it would make a counter-offer to buy the software developer that would exceed a rival offer from equity fund KKR.

All the 33 industry sub-indexes on the Tokyo Stock Exchange fell, with energy explorers shedding 6.4% to become the worst performer.

Of 225 components in the Nikkei, 214 stocks fell, while 11 rose.