Japanese shares ended lower Wednesday after Prime Minister Sanae Takaichi was reportedly warned not to rely on the Bank of Japan to curb a sharp rise in bond yields, given the high cost of intervention and the risk it could trigger an unwanted drop in the yen.

The Nikkei 225 fell 0.78%, or 427.30 points, to close at 54,293.36.

Japanese government bond prices plunged last month after Prime Minister Sanae Takaichi called a snap election and pledged to suspend a food levy for two years, stoking fears of heavier fiscal spending and a larger debt burden, Reuters reported.

Super-long JGB yields hit record highs in a rout likened to the UK's 2022 "Truss" shock, keeping investors on edge ahead of Sunday's vote.

The volatility has raised alarm at the Bank of Japan, though the central bank reportedly sees the risks of intervening in the bond market as outweighing the benefits for now.

In economic news, Japan's services activity grew at its fastest pace in nearly a year in January, with the index rising to 53.7 from 51.6. New orders strengthened, employment rose for a 10th month, and backlogs grew at the quickest pace since September. Input inflation eased to a near two-year low, but firms raised prices faster.

On the corporate front, Shimano (TYO:7309), which rose nearly 1%, said a US court granted final approval of a settlement over certain bonded 11-speed HOLLOWTECH II road cranksets sold in the US.

Nitto Boseki (TYO:3110), which ended nearly 8% higher, plans to launch an upgraded T-glass fiber cloth for AI chips as early as 2028 and expand capacity, Nikkei reported Wednesday.

IHI (TYO:7013), which fell 1%, plans to invest 20 billion yen over three years to boost output of nuclear plant components at its Yokohama site, Nikkei reported Wednesday.