Nikkei Pulls Back as Japan's Inflation Rate Hits 10-Month High

Japan's Nikkei 225 index fell on Friday after reaching a six-week high the day before, as investors locked in their gains and assessed the impact of inflation and interest rates.

The index dropped 0.94% to 68,309.46, with the broader Topix declining by about 1%. This pullback coincided with an increase in Tokyo's core inflation rate, which rose to its fastest pace in 10 months.

This fresh inflation signal keeps the possibility of further Bank of Japan rate hikes in consideration, which can weigh on pricey growth stocks that rely heavily on future profits. The biggest losers among these stocks included SoftBank Group and automaker Nissan, which sank by 5.83% and 4.97%, respectively.

However, not all news was negative for the domestic market. According to a local research firm, Tokai Tokyo Intelligence Laboratory, sentiment among large manufacturers rose for a sixth straight quarter, as shown in the Bank of Japan's tankan survey.