TOKYO: Japan’s Nikkei share average fell on Tuesday, weighed down by worries of a stronger yen, as investors braced for a super-sized interest rate cut from the U.S. Federal Reserve this week.

The Nikkei closed 1% lower at 36,203.22, after earlier dipping more than 2%. The broader Topix index lost 0.6%.

Japanese markets were closed on Monday for a national holiday, when the yen spiked to a more than one-year high against the dollar.

Technology giants were the biggest drags on the Nikkei on Tuesday, amid broader losses in export-dependent companies.

Banks also underperformed as sliding bond yields at home and abroad slashed the outlook for income from investment and lending.

Market odds of a 50 basis-point (bp) Fed rate cut on Wednesday have soared to 67%, versus 33% probability for a quarter-point reduction.

In total, 120 bps of cuts are priced for the remaining three Fed meetings this year, which means traders expect a second outsized reduction either in November or December.

The Bank of Japan will announce its policy decision on Friday. While no rate increase is expected this time, officials have struck hawkish postures in recent communications, fuelling bets for a faster pace of policy normalisation.

“People are concerned about the potential for the yen to continue to rise,” with “both the Fed and BOJ playing their parts in that,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management.

“People, including myself, are starting to get the impression the BOJ is in a rush to raise interest rates, irrespective of developments in the economy.”

Chip-making equipment giant Tokyo Electron dived 5.24%, becoming the biggest drag on the index. Chip-testing machinery maker Advantest sagged 5.63% and artificial intelligence-focused startup investor SoftBank Group slid 3.1%.

Automakers lost ground, with Toyota Motor dropping 2% and Nissan off 2.07%.

Among lenders, Resona Holdings led declines on the Nikkei, dropping 6.38%. Nomura Holdings retreated 2.61%.