The Nikkei 225 index fell 1.14% to close at 50,446 on Friday (December 5), while the Topix index fell 1.05% to 3,363. This decline erased some of the previous session's gains, as speculation intensified that the Bank of Japan (BOJ) could raise interest rates later this month. Reports stated that key members of Prime Minister Sanae Takaichi's government would not oppose a BOJ move in December, although some senior officials remained cautious about the timing. The market has even priced in the possibility of one or two additional rate hikes next year.

Negative sentiment also carried over from Wall Street, which was subdued overnight. US employment data showed the job market remained quite strong, slightly reducing expectations that the Federal Reserve would aggressively cut interest rates next week. The combination of the possibility of an interest rate hike in Japan and diminishing expectations of a rate cut in the US has investors tending to reduce risk in the Japanese stock market.

Selling pressure on the Tokyo Stock Exchange was evident in large stocks. Among those recording sharp declines were Advantest (-2.4%), Tokyo Electron (-2%), and Toyota Motor (-2.3%). On the corporate side, Mitsubishi UFJ announced plans to partner with Morgan Stanley in the asset management business, extending a 17-year partnership—a positive piece of news amidst the market downturn. (az)

Source: Newsmaker.id