Nikkei Tumbles 2.8% as Oil Prices Surge Above $108

Tokyo stocks plummeted on September 11, with the Nikkei 225 closing at 63,442, down 2.8%, as oil prices surged above $108, renewed Middle East tensions, U.S. rate-hike fears and expectations for another Bank of Japan increase triggered a broad selloff.

The decline pulled the Nikkei to its weakest level in several weeks and extended the volatile trading pattern that has defined the Tokyo market since late August.

The jump in crude oil prices, which traded above $108 a barrel for the first time since May, was a major concern for Japan, which imports most of its energy. Higher oil prices feed into gasoline, electricity, aviation fuel, shipping, logistics, chemicals and manufacturing costs, posing a direct threat to inflation, household spending and corporate margins.

The Bank of Japan's policy outlook became even more important after official data showed Japan's wholesale inflation remained elevated at 7.6% in August from a year earlier. Producer prices rose 7.6%, reinforcing the view that cost pressure is still strong across the corporate sector, and strengthening expectations that the BOJ will raise its policy rate from 1% to 1.25% at its September 17-18 meeting.