FX.co ★ Japanese Shares Drop as Oil Prices Surge

The Nikkei 225 Index fell 2.5% to below 54,000, while the broader Topix Index declined 1.5% to 3,660 on Thursday, erasing gains from the previous session. The drop came as oil prices climbed again following attacks on energy facilities in the Middle East, intensifying inflation concerns. Japan is particularly vulnerable to oil supply shocks because of its heavy reliance on crude imports from the region.

Japanese equities also tracked a sharp selloff on Wall Street overnight, driven by stronger-than-expected US PPI data and higher inflation projections from the Federal Reserve, which reduced expectations for interest rate cuts. Meanwhile, the Bank of Japan is widely expected to keep its policy rate unchanged today, but may signal a more hawkish stance as the weak yen and elevated oil prices increase upside risks to inflation.