TOKYO: Japanese shares fell on Wednesday, dragged down by Sony Group, Toyota Motor and other market heavyweights, tracking Wall Street's weak finish overnight.

The Nikkei share average fell 1.5% to 27,828.60 by 0135 GMT, after losing as much as 2% earlier, while the broader Topix lost 1.54% to 1,947.94.

Wall Street's main indexes fell sharply overnight, as weak results from Goldman Sachs weighed on financial stocks and tech shares continued their sell-off as US Treasury yields rose to milestones.

"Japanese shares fell across the board today because of the declines on Wall Street. Among several reasons that weighed on the US stocks, oil price hike is the most critical to Japan because it would raise costs for Japanese companies," said Takatoshi Itoshima, strategist at Pictet Asset Management.

"Investors will remain cautious about rising US interest rates. For that reason, the market could remain tepid until the FOMC (US Federal Open Market Committee) next week."

Japanese shares give up gains on rising US bond yields

Sony Group tanked 8.8% and was the worst performer on the Nikkei after gaming rival Microsoft agreed to buy developer Activision Blizzard.

Toyota Motor fell 2.56% after the automaker said it expects to miss its annual 9 million vehicle production target as it tackles chip shortages.

Toyota's affiliate Denso lost 4.14%. Chip-related Tokyo Electron and Advantest lost 4.88% and 3.8%, respectively.

Game contents maker shined, with Konami Holdings rising 2.49%, Nintendo gaining 1.76% and Bandai Namco Holdings climbing 1.14%.

Pacific Metals was a top gainer on the Nikkei, with a 2.56% gain. Yaskawa Electric rose 2%.

Murata Manufacturing, losing 5.55%, was one the worst performers on the Nikkei, with Taiyo Yuden, losing 4.67%.