TOKYO: Tokyo shares sank Monday after US Federal Reserve Chair Jerome Powell pledged to act “forcefully” against soaring inflation, signalling more rate hikes to come.

The benchmark Nikkei 225 index tumbled 2.66 percent, or 762.42 points, to close at 27,878.96, while the broader Topix index lost 1.79 percent, or 35.49 points, to 1,944.10.

The dollar stood at 138.77 yen, rising from 137.38 yen seen Friday in New York after Powell spoke at an annual symposium of global central bankers in Jackson Hole, Wyoming.

“The Dow dropped after Powell made his hawkish stance clear,” Okasan Online Securities said.

“The Tokyo market was also down across the board on Monday,” the brokerage said, noting that chip-related shares in particular faced sell-offs.

In Jackson Hole, the Fed chair emphasised his resolve about “using our tools forcefully” to fight inflation, even if it meant causing pain to American families.

Tokyo stocks close lower on interest rate worries

His speech erased any hope that the US central bank may slow the speed of its rate hikes or even return to cutting rates to avoid an economic slowdown, analysts said.

After Powell’s remarks, the Dow closed down 3.0 percent while the tech-rich Nasdaq index lost 3.9 percent.

In Tokyo, Advantest, which makes chip-testing kits, dropped 4.18 percent to 8,010 yen, while Tokyo Electron, which produces tools to build semiconductors, plunged 5.10 percent to 43,530 yen. SoftBank Group lost 3.66 percent to 5,496 yen.

Olympus tumbled 3.86 percent to 2,959 yen. After trading ended, the optical equipment maker announced the sale of its microscope subsidiary to Bain Capital for 427.7 billion yen ($3 billion).

Honda gained 0.41 percent to 3,669 yen after Japan’s Nikkei business daily said the automaker has decided to set up an electric vehicle battery plant with LG Energy Solution in the US.

Honda did not confirm the reports when contacted by AFP.