SINGAPORE, Dec 28 (Reuters) - Japanese stocks on Wednesday retreated from last session's one-week highs, weighed down by an overnight drop in global chip shares and worries over China's COVID-19 situation.
The Nikkei share average ended down 107.37 points, or 0.41%, at 26,340.50. The index has lost about 8.5% so far this year, including December's 5.9% slide.
The declines in shares of Uniqlo store operator Fast Retailing and startup investor SoftBank Group Corp weighed the most on the Nikkei. Softbank shares hit their lowest in two months.
Earlier in the day, the Bank of Japan released a summary of opinions from its December 19-20 monetary policy meeting, in which the central bank kept its ultra-easy policy but shocked markets with a surprise tweak to its bond yield control, allowing long-term interest rates to rise more.
Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities, said the summary showing BOJ board members discussed growing prospects that higher wages could finally eradicate the risk of a return to deflation, was "not being considered as a factor in the market".
The policy tweak has pushed yields higher, stoked expectations of wage increases and inflation and also pushed the yen up, creating a conflicting mix of drivers for stocks.
The dollar traded at 133.97 yen, up 0.35% during the session.
Naka Matsuzawa, chief Japan macro strategist at Nomura, said this week could see the after-effects of the BOJ's policy surprise linger, "with this primarily appearing as speculation that the Bank will raise short-term policy rates", which are currently negative.
"This speculation is the main driver behind unexpected JPY appreciation and weakening in the stock market," he said.
The broader Topix ended down 0.06%, while the Mothers Index of start-up firm shares lost 1.23%. (Reporting by Tokyo markets team; Editing by Krishna Chandra Eluri and Vinay Dwivedi)
