TOKYO: Japan's Nikkei index touched a one-year low on Tuesday, weighed down by investor caution over the situation in Ukraine, broadening inflationary risks and on concerns of a faster-than-expected US rate hike by the Federal Reserve.
The Nikkei share average fell 2.5% to 26,890.94, its lowest level since Dec. 29, 2020.
At 0516 GMT, the Nikkei index was down 2.1% at 27,001.91. The broader Topix lost 2.18% to 1,887l.70.
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The Mothers Index of start-up shares fell more than 5% to its lowest since April 2020.
Technology stocks dragged the Nikkei lower, with start-up investor SoftBank Group losing 5.75%, chip-making equipment maker Tokyo Electron falling 3.11%. Motor maker NIDEC slipped 4.8%.
Wall Street bounced back from a steep sell-off to close higher overnight, with bargain hunters pushing the indexes into a positive territory.
Investors are keenly watching every move of the US Fed as the central bank will begin its two-day meeting later on Tuesday, with investors starting to speculate that there is a small possibility that they will announce a surprise rate hike.
In a sign that geopolitical tensions are heating up, NATO announced it was putting forces on standby to prepare for a potential Russian invasion of Ukraine.
"Investors became cautious after seeing the steep falls on Wall Street last night, and they became even more sensitive to declines in US futures today," said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities.
"The market will remain like this until the FOMC (Federal Open Market Committee) is over but after tomorrow, with the earnings season kicking off, investors will start hunt for stocks with good earnings."
Nihon M&A Center Holdings tanked 12% after the broker for mergers and acquisitions for small firms delayed its earnings announcement.
Defence-related stocks advanced amid tension between Russia and NATO, with Ishikawa Seisaku jumping 11.96% and Howa Machinery rising 5.5%.
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