The Nikkei 225 Index fell 1.6% to below 37,200, while the broader Topix Index dropped 0.7% to 2,710 on Tuesday, erasing gains from the previous session and tracking a sharp decline in US stocks overnight. This came after US President Donald Trump confirmed that tariffs on key trading partners would take effect on Tuesday.

Analysts are warning that markets may be underpricing tariff risks given how quickly a global trade war could escalate. In Japan, investors reacted to data showing an unexpected rise in the unemployment rate, which climbed to 2.5% in January from 2.4% in December.

Additionally, capital spending by Japanese firms revealed a surprising decline in the fourth quarter. Technology stocks were hit hardest, with significant losses from companies such as Disco (-5%), Advantest (-8%), SoftBank Group (-4.9%), Lasertec (-2.5%), and Tokyo Electron (-1.9%).

Source: Trading Economics