TOKYO, Dec. 17 (Xinhua) -- Tokyo stocks finished sharply lower Friday after the Bank of England (BOE) decided to raise interest rates, heightening investor caution about the hawkish monetary policy.
The 225-issue Nikkei Stock Average finished 520.64 points, or 1.79 percent, lower from Thursday at 28,545.68.
The broader Topix index of all First Section issues on the Tokyo Stock Exchange closed 28.61 points, or 1.42 percent, lower at 1,984.47.
Trading volume on the main section increased to 1,440.02 million shares from Thursday's 1,053.52 million shares.
Tokyo stocks opened low from the outset and extended losses in the afternoon after the benchmark Nikkei index rose over 2 percent the previous trading day, as market sentiment was dragged down by the BOE's decision to increase interest rates to cope with inflation.
The BOE became the first major central bank to raise interest rates since the COVID-19 pandemic started. On Wednesday, the U.S. Federal Reserve decided to end its bond purchases faster than planned and indicated three possible interest rate hikes next year.
Toshikazu Horiuchi, an equity strategist at IwaiCosmo Securities Co., said, "The market expected the somewhat hawkish stance by the U.S. Federal Reserve, but the Bank of England's decision was not foreseen at all. It highlighted how developed economies are shifting toward implementing tighter policies."
However, the Japanese central bank decided on Friday to continue its ultraloose monetary policy as its 2-percent inflation target is still far off. The Bank of Japan (BOJ) also decided to scale back its COVID-19 funding supports for large companies but retain a program supporting small and midsize firms until September.
Makoto Sengoku, a senior equity market analyst at the Tokai Tokyo Research Institute, said the BOJ's announcement of trimming the support dampened investor sentiment, although it only had a limited impact on the market.
He said, "The decision by the BOJ came at a time when the Japanese government is trying to hand out cash as part of its COVID-19 support. So it may have given investors a negative impression that the BOJ and the government are inconsistent."
By the close of play, all industry sectors lost ground with precision instruments, services, and metal product firms leading the decline. Losing issues outnumbered gaining ones 1,635 to 451 on the First Section, while 98 finished unchanged.
Technology issues tracked overnight losses in U.S. counterparts, with Kyocera ending down 1.2 percent and Fanuc closing 1.9 percent lower.
Air transportation issues were hit by additional cases of the Omicron variant confirmed in Japan. ANA Holdings fell 0.8 percent, and Japan Airlines slid 1.8 percent.
Chugai Pharmaceutical dropped 5.2 percent after announcing Thursday that it will not continue to develop oral medicine for COVID-19. Enditem
