Japanese stocks closed at nearly four-week lows on Wednesday, dragged down by banking stocks after comments from a senior Bank of Japan official reduced expectations for earlier interest rate hikes by the central bank. The Nikkei 225 index fell 0.88% to close at 41,938.89 points, while the Topix index declined 1.07% to 3,048.89 points, marking its lowest closing level since August 8.

The banking index tumbled 3.19%, ranking as the worst performer among the 33 sector sub-indices on the Tokyo Stock Exchange. Mitsubishi UFJ fell 3.15%, creating the biggest drag on the Topix index. Sumitomo Mitsui and Mizuho Financial Group both declined more than 3%. The insurance sector dropped 2.73%.

Bank of Japan Deputy Governor Himeno stated on Tuesday that the BOJ should continue raising interest rates, but warned that uncertainty in the global economy remains high, suggesting the central bank is not rushing to push up borrowing costs that remain at low levels. "Market expectations for BOJ rate hikes weakened after Himeno's comments, as he remained cautious about the impact of (President Trump's) tariffs," said Seiichi Suzuki, chief equity analyst at Tokai Tokyo Intelligence Laboratory. "Clearly, the buying momentum from foreign investors supporting domestic stock market gains has diminished."

Optimism about domestic corporate prospects and easing concerns about Trump's tariff impact helped both the Nikkei and Topix indices reach record highs last month.

Today, semiconductor equipment manufacturer Tokyo Electron fell 1.92%, while tech investor SoftBank Group declined 5.27%. Fast Retailing, owner of the Uniqlo brand, rose 0.5%, providing the biggest support to the Nikkei index.

Global investors are awaiting the U.S. non-farm payroll report scheduled for release on Friday to observe whether U.S. employment growth in August will continue to show weakness for the fourth consecutive month.