TOKYO, March 12 (Reuters) - Japan's Nikkei share average extended declines on Tuesday, as heightened expectations that the Bank of Japan (BOJ) could exit from negative interest rates next week prompted traders to adjust positions.
The Nikkei was 0.6% lower at 38,586.92 by the midday break, after seeing widespread losses in the morning session. Of the index's 225 constituents, only 42 advanced versus 180 decliners.
Heavyweight shares weighed on the Nikkei, which has climbed 16% this year so far. Chip-making equipment giant Tokyo Electron wiped off about 61 points of the index's 233.57-point decline with a 1.6% loss.
AI-focused startup investor SoftBank Group was down roughly 1%.
Big name automaker Toyota Motor fell 1.5% as the yen held on to recent gains on expectations that the BOJ could exit negative interest rates at its policy meeting on March 18-19.
The BOJ's decision not to make purchases of Japanese exchange-traded funds on Monday despite local shares dropping sharply has further stoked speculation that the BOJ will soon end its ultra-easy monetary policy.
"There's a strong belief in the market that the BOJ will stop buying ETFs when it exits negative rates," said Maki Sawada, a strategist at the Investment Content Department of Nomura Securities.
"The fact that it didn't make purchases in such a situation has strengthen expectations for policy revisions," particularly with the bank's next monetary policy meeting right around the corner.
That could lead to some position adjustments this week as traders await the BOJ's decision, she added.
The broader Topix was down 1.26% at 2633.23.
Banks, insurance firms, and wholesalers, which have seen some of the largest gains since the beginning of 2024, slipped to the bottom of Tokyo Stock Exchange's 33 industry sectors, with the sectors falling more than 2%, each, as traders repositioned. (Reporting by Brigid Riley; Editing by Rashmi Aich)
