FX168 Financial News Agency (Asia Pacific) - On Thursday, October 31st, the Japanese stock market closed lower as investors took profits after the Bank of Japan (BOJ) kept its key interest rate unchanged.

At the close, the Nikkei 225 Index fell by 196.14 points, or 0.50%, to 39,081.25 points. The broader Topix index fell by 8.21 points, or 0.30%, to 2,695.51 points. #JapaneseMarket#

Following the overnight decline in the U.S. stock market, the index opened down by 0.25%. After the Bank of Japan announced its policies, the Nikkei index fell by over 1%.

In the primary market, the sectors of electrical appliances, pulp and paper, and wholesale experienced the largest declines.

As investors locked in profits on the second day after the Nikkei index first surpassed 39,000 points, stocks saw a decline with tech stocks leading the way. Concerns over the returns on investments in artificial intelligence were triggered by recent financial reports from some U.S. tech giants.

Regarding individual stocks, the parent company of Uniqlo, Fast Retailing, dropped by 2.21%, becoming the biggest drag on the Nikkei index for the day. Kyocera's stock price plummeted by 10.42% due to the smartphone manufacturer cutting its full-year operating profit forecast for 2025.

On the other hand, equipment manufacturer Advantest saw its stock price rise by 6.43% due to an upward revision in profit forecasts, but some early gains were trimmed due to profit-taking.

The Bank of Japan maintained ultra-low interest rates on Thursday and stated the need to assess the global economic developments.

Senior investment portfolio manager Takamasa Ikeda of GCI Asset Management Company stated:

Investors sell stocks after major events to lock in profits. The Nikkei index has been slightly overheated after the recent rebound. The decision of the Bank of Japan was as expected but became the catalyst for selling.

The Nikkei index climbed to a two-week closing high on Wednesday. Since hitting a peak in July, the Nikkei index has been influenced by fluctuations in the yen, mainly driven by expectations of US interest rate cuts and a stronger dollar. Nevertheless, the index has risen over 17% so far this year.

Due to the ruling Liberal Democratic Party-led coalition losing the majority in parliament in the weekend elections, the Japanese market has been plagued by political uncertainty this week. The composition of the future government remains unclear, with Prime Minister Shizo Abe and the LDP possibly seeking to establish a cooperative relationship with a small opposition party that supports maintaining ultra-loose monetary policy and opposes tax hike plans.

Analysts state that with the ruling coalition in Japan losing a majority of seats in the lower house elections on Sunday, selling accelerated in the afternoon as the Bank of Japan seems to stick to its tightening stance.

Senior stock market analyst at Tokai Tokyo Securities, Makoto Sengoku, said:

For market participants hoping for a change in policy by the Bank of Japan, the results were not as expected, leading to a stock market decline in the afternoon.

He mentioned that market participants may adopt a cautious approach to positive trading until the results of the US presidential election next Tuesday.