Japan's Nikkei share average closed lower on Thursday, although it hovered near the session high amid a recovery in broader Asian markets as investors assessed the U.S. Federal Reserve's hints of a pivot on its policy tightening.
The Nikkei index ended 0.17% lower at 27,419.61, but hovered close to the day's high of 27,461.97. The broader Topix closed 0.29% weaker at 1,957.32, but held ground near the session's high of 1,960.14.
Japanese shares tracked an overnight slump in Wall Street, mainly dampened by remarks from U.S. Treasury Secretary Janet Yellen who told lawmakers that she had not considered or discussed "blanket insurance" for U.S. banking deposits without approval by Congress.
Market sentiment was further weighed down by Fed Chair Jerome Powell's comment that the U.S central bank would do "enough" to tame inflation.
"This month's flare-up in financial stability is set to tighten lending conditions and hurt growth," said Mansoor Mohi-uddin, chief economist at the Bank of Singapore. "We continue to see U.S. recession this year."
"Investors should remain cautious on risk assets, expect a weaker U.S dollar as Fed rate hikes peak, and keep favouring high-quality bonds as safe-haven hedges against recession risks," he added.
Investor focus is also on the Bank of England, which was widely expected to raise rates again after a surprise jump in inflation.
In Japan, the yen strengthened 0.60% to 130.64 per dollar on Thursday.
Financials Chiba Bank Ltd and Mitsubishi UFJ Financial Group Inc were among the laggards in the Nikkei, ending down 1.75% and 1.36%, respectively.
Recruitment firm Recruit Holdings Co Ltd and vehicle maker Suzuki Motor Corp closed 4.78% and 2.12% higher, respectively.
Suzuki's upbeat performance came in after Citi raised its stock target price to 6,400 yen per share from 5,500 yen, and retained its "buy" rating.
Gainers, however, beat losers by 115 to 100, while 10 remained unchanged.
On the Topix, hotels operator Agora Hospitality Group Co Ltd and artificial intelligence company HEROZ Inc were among the top losers.
Technology firm MegaChips Corp and semiconductor company Axell Corp were the biggest gainers with a jump of 13.85% and 14.97%, respectively.
Gainers in the Topix outpaced losers by 1,256 to 781, with 122 trading flat.
(Reporting by Yantoultra Ngui; Additional reporting by Ankur Banerjee in Singapore and Daniel Leussink in Tokyo; Editing by Sherry Jacob-Phillips)