Tokyo stocks plunged Thursday in response to a Wall Street sell-off on the U.S. Federal Reserve’s indication of an earlier policy shift to tightening.

The 225-issue Nikkei average of the Tokyo Stock Exchange sank 272.68 points, or 0.93%, to close at 29,018.33, following a 150.29-point drop Wednesday.

The Topix index of all first section issues ended down 12.29 points, or 0.62%, at 1,963.57, snapping its three-day winning streak. The broader index inched up 0.38 point the previous day.

Stocks dived right after the opening bell, as investors rushed to sell in view of drops in all three major U.S. market indicators including the Dow Jones Industrial Average on Wednesday.

Sentiment was chilled by Fed policymakers at their meeting through Wednesday newly projecting rate hikes in 2023, compared with their previous forecasts that there would be no hike at least until 2024.

Tightening concerns were also fueled by Fed Chairman Jerome Powell’s remarks at a news conference held after the Federal Open Market Committee meeting that discussions about tapering quantitative easing were held at the policymaking meeting.

In the Tokyo market, technology stocks met with particularly severe selling induced by spikes in U.S. long-term interest rates.

Stocks pared their losses in the afternoon, however, thanks to a moderate rise in Dow futures in off-hours trading and the dollar’s appreciation against the yen.

The Fed’s more-than-expected hawkish moves “threw cold water on the market,” which had largely been bullish since the outset of the week, said Masayuki Otani, chief market analyst at Securities Japan Inc.

“But the quickly emerging view that neither the tapering nor the rate hikes will take place until the global economy recovers fully from the coronavirus crisis limited the market’s loss,” Otani noted.

Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co., pointed out that stocks resisted sinking deeper as the start of tapering talks had already been factored in.

On the TSE first section, decliners outnumbered gainers 1,409 to 673 while 111 issues were unchanged. Volume decreased to 997 million shares from Wednesday’s 1.028 billion shares.

Construction machinery-maker Komatsu tumbled 5.25% following an investment rating downgrade.

The U.S. interest rate rises pushed down electronic parts maker TDK by 2.62% and tech investor SoftBank Group by 1.40%.

Steel-makers and other materials producers met with broad-based selling.

Meanwhile, export-oriented firms such as automaker Toyota were buoyed by the stronger dollar.

Banking groups and insurers including Mitsubishi UFJ and T&D benefited from the higher U.S. interest rates.

In index futures trading on the Osaka Exchange, the key September contract on the Nikkei average plunged 250 points to end at 29,000.

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