Japanese shares closed lower on Tuesday after the Bank of Japan signaled room for future rate hikes but gave no clear sign of an October move.

The Nikkei 225 fell 0.25%, or 111.12 points, to end at 44,932.63.

One BOJ board member said it may be time to raise rates, while others urged caution given uncertainty over the US economy, a Sept. 18-19 meeting summary showed.

The record signaled growing support for another hike amid high inflation, though most members preferred waiting for more data. Two dissents against holding rates stoked October hike bets, but the summary stopped short of signaling a move.

In economic news, Japan's construction orders fell 13.3% in July, the fourth straight monthly drop, with private orders down 13.8% and public orders down 3.7%, government data showed Monday.

Housing starts fell 8.7% while non-residential projects jumped 20.7%, reflecting corporate investment in offices and factories.

Retail sales slipped 1.1% in August to 12.68 trillion yen, the first decline in three years, reversing July's 0.4% growth, the trade ministry said Tuesday. Sales fell across food, fuel, and motor vehicles, while wholesale trade dropped 2% to 36.7 trillion yen.

Factory output also weakened, down 1.2% in August from July and 1.3% on the year, marking a second straight monthly fall. Shipments slid 1.1% and inventories 2.9%. Manufacturers expect output to rebound 4.1% in September and 1.2% in October, the ministry said.

On the corporate front, Heartseed (TYO:219A) said Novo Nordisk ended their global collaboration on iPS cell-derived heart therapies. Novo is refocusing on diabetes and obesity, while Heartseed regains rights to its HS-001 and HS-005 treatments for severe heart failure.

Nxera Pharma (TYO:4565), which ended 2.1% higher, received a $10 million milestone payment from AbbVie after hitting a second research target in their neurological disease partnership. The 2022 tie-up could bring Nxera up to $40 million in near-term research milestones, $1.2 billion in later payments, and royalties on sales.

Veritas In Silico (TYO:130A), which ended 1.4% lower, will relocate its Shin-Kawasaki Research Institute to a new Kawasaki City facility in March 2026. The move supports expansion in AI, staffing, and equipment, with costs already included in its 2025 forecast. Depreciation will begin in 2026.

Source: MT Newswires