The Nikkei 225 Index fell 2.5% to below 54,000, while the broader Topix Index lost 1.5% to 3,660 on Thursday, reversing gains from the previous session as oil prices surged again following attacks on energy facilities in the Middle East, stoking inflation concerns. Japan remains highly exposed to oil supply shocks due to its reliance on Middle Eastern imports. Japanese shares also followed a sharp Wall Street selloff overnight, triggered by hotter-than-expected US PPI data and rising inflation forecasts from the Federal Reserve, which narrowed the scope for interest rate cuts. Meanwhile, the Bank of Japan is widely expected to keep its policy rate unchanged today but could signal a hawkish bias as a weak yen and elevated oil prices heighten inflation risks. Tech stocks led the decline, with sharp losses from Kioxia Holdings (-4.5%), Advantest (-5.4%), Disco Corp (-2.6%), Lasertec (-3.3%) and SoftBank Group (-3.3%). Defense and financial stocks also came under pressure.