Nikkei falls sharply as caution rises ahead of geopolitics and policy

The Nikkei 225 dropped 1.75% to close at 58,476 on Friday, pulling back from record highs as investors turned cautious ahead of the weekend and awaited progress in US'Iran peace talks.

In recent developments, Donald Trump said he was confident the conflict with Iran could end soon, adding that Tehran had agreed to terms including giving up nuclear ambitions and reopening the Strait of Hormuz. He also announced a 10-day ceasefire between Israel and Lebanon, which could support further negotiations.

Meanwhile, Kazuo Ueda offered no clear guidance on interest rates ahead of the central bank's policy decision this month, underscoring the challenge of balancing inflation risks with concerns about economic growth.

Technology and AI-related stocks led the market decline. Kioxia Holdings fell 9.6%, Fujikura dropped 2.7%, Advantest slipped 1.8%, SoftBank Group lost 2.6%, and Lasertec declined 4.4%.