Japanese shares ended lower on Monday after the Bank of Japan signaled a possible rate hike, citing persistent food inflation and its impact on wages.

The Nikkei 225 closed 0.18% lower, or by 68.57 points, to end at 37,608.49.

The BOJ held rates steady last week but hinted at the possibility of raising them sooner than expected due to persistent food-driven inflation.

BOJ Governor Kazuo Ueda said stubbornly high food costs could have a lasting impact on inflation and wage growth, suggesting the bank's resolve to keep raising rates from the current 0.5%.

Ueda also warned of uncertainty from potential US tariffs under a new Trump administration but said the BOJ may factor this into its quarterly outlook at the April 30-May 1 meeting, leaving room for a rate hike earlier than the third quarter consensus.

On the economic front, Japan's private sector contracted in March, with the au Jibun Bank Flash Composite PMI falling to 48.5 from 52.0 in February.

Services dropped to 49.5 from 53.7 as rising costs hit spending, while manufacturing further deteriorated to 46.5 from 48.4, the sharpest decline in a year. Input costs rose, and business confidence hit a 50-month low amid cost and trade concerns.

In corporate updates, Nisshin Oillio (TYO:2602) lowered its full-year profit forecast by 10.3% to 13 billion yen due to slower price adjustments in its oil and fat segment.

Net sales forecast remains at 535 billion yen, while the processed food and chocolate business is set to outperform.

LY Corp. (TYO:4689) will launch a tender offer on March 24 to acquire Beenos (TYO:3328) after regulatory delays. The offer seeks at least 8.88 million shares to be acquired at 4,000 yen each, totaling up to 53.8 billion yen. Major shareholders have committed to tender their shares.

Hon Hai Precision Industry (TPE:2317) will manufacture EVs for Mitsubishi Motors (TYO:7211) in Taiwan, targeting Australia and New Zealand as destination for the initial production, Bloomberg News reported. The timeline remains unclear.