TOKYO: Tokyo’s key Nikkei index closed nearly four percent higher on Thursday, its largest one-day gain in 21 months, as inflation fears receded on drops in crude oil prices.

The benchmark Nikkei 225 index ended up 3.94 percent or 972.87 points at 25,690.40, while the broader Topix index surged 4.04 percent or 71.14 points to 1,830.03.

Soaring share values reflect “receded worries over inflation as crude oil prices dropped,” said Mitsuhiro Shibata, senior strategist of Daiwa Securities. He noted that higher commodity prices, along with high oil prices, would have harmed Japanese corporate profits.

The dollar firmed to 116.06 yen in Asian trade, from 115.86 yen in New York on Wednesday.Gains on Wall Street and recent falls in Tokyo stocks also supported the Japanese market, Shibata added.

Looking ahead, the market will likely remain sensitive to major headlines regarding Russia’s invasion of Ukraine, while investors await US consumer price data and the ECB policy meeting later in the day, analysts said.