Nikkei Falls Nearly 2% Amid Rate Hike Fears

Japan's Nikkei share average fell nearly 2% on Monday as expectations of interest rate hikes weighed on investor sentiment.

The benchmark Nikkei 225 dropped to 65,096.63 in early trading, while the broader Topix declined 0.84% to 4,111.71.

Investor sentiment was also affected by losses on Wall Street last week after Federal Reserve Chair Kevin Warsh reiterated the central bank's focus on controlling inflation, strengthening expectations of a potential interest rate hike.

The combination of weaker U.S. stocks and rising expectations for higher U.S. interest rates is expected to weigh on Japanese equities, with analysts predicting that the Bank of Japan will raise interest rates at its meeting next month.