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15.05.202604:32:30UTC+00Japanese Shares Drop for Second Day

The Nikkei 225 Index dropped 1.6% to below 61,700 on Friday, while the broader Topix Index declined 0.5% to 3,860, extending the previous session’s losses as investors tracked geopolitical tensions in the Middle East and the ongoing summit between US President Donald Trump and Chinese President Xi Jinping.

Oil prices were on course for a sharp weekly gain after US–Iran negotiations stalled and the Strait of Hormuz remained effectively closed, a development that weighed on oil-import-dependent economies such as Japan. Risk appetite was further dampened after Xi cautioned in talks with Trump that Taiwan could become a source of “clashes” between the world’s two largest economies.

On the domestic front, stronger-than-expected producer inflation reinforced expectations that the Bank of Japan may come under increasing pressure to raise interest rates. Major decliners included Kioxia Holdings (-8.2%), Fujikura (-9.6%), Furukawa Electric (-6.3%), Advantest (-6.8%) and Disco Corp (-5%).

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