TOKYO, Jan. 13 (Xinhua) -- Japan's benchmark Nikkei stock index closed lower Friday as slowing inflation in the U.S. sent the U.S. dollar lower versus the yen and sparked concerns the Bank of Japan (BOJ) may soon tighten its monetary policy.
The 225-issue Nikkei Stock Average dropped 330.30 points, or 1.25 percent, from Thursday to close the day at 26,119.52.
The broader Topix index, meanwhile, fell 5.10 points, or 0.27 percent, to finish at 1,903.08.
Dealers here said that stocks were pressured by rising expectations the BOJ may further tweak its policy at its meeting next week, following such a move in December that took markets by surprise and was widely considered a move away from its ultra-loose monetary policy.
"Nobody is sure what will happen at next week's Bank of Japan meeting, and there may be some disappointment. I don't think they will reach a concrete decision, so yen appreciation can be reversed and the declines in the Nikkei can be reversed," Kenji Abe, a strategist at Daiwa Securities, was quoted as saying.
Market strategists also said the yen's rise against the U.S. dollar following the release of U.S. inflation data coming out in line with median market expectations, impacted exporter issues.
"The yen's strength caused by the CPI data was amplified by views that the BOJ may change its policy further," Yuzo Sakai, chief manager of business planning at Ueda Totan Forex Ltd., was quoted as saying.
"Such speculation has spread among many investors, especially overseas, so the upward pressure on the yen will remain until the central bank's policy meeting next week," said Sakai.
Issues with a broad exposure to overseas markets lost ground, with Toyota reversing 2.3 percent, while Mitsubishi Motors and Mazda Motors both skidded down 4.5 percent.
While Sony Group lost 1.6 percent, Nikkei heavyweight Fast Retailing, Uniqlo clothes store operator, dragged the broader market down, slumping 8 percent.
Financial issues got a boost, however, from speculation about the BOJ, with Mitsubishi UFJ Financial Group rising 2.5 percent.
Chip-oriented stocks followed their U.S. peers higher overnight, with chip-making equipment Tokyo Electron adding 3 percent.
The turnover on the final trading day of the week came to 3,455.60 billion yen (26.89 billion U.S. dollars). ■