Sentiment towards markets was dented by increasing conviction that the Bank of Japan will raise interest rates at the conclusion of a two-day meeting on Friday

Most Asian stocks dropped on Thursday as technology shares resumed their decline on persistent concerns over stretched artificial intelligence valuations, while anticipation of a hawkish Bank of Japan also weighed.

Nikkei 225 declined 1% on Thursday, while the TOPIX shed 0.3%.

Sentiment towards markets was dented by increasing conviction that the Bank of Japan will raise interest rates at the conclusion of a two-day meeting on Friday.

Bets on a hike come amid persistent weakness in the yen and increasingly sticky domestic inflation– two trends that the central bank has signalled it will aim to quell. BOJ officials also recently signalled that they will discuss raising interest rates during their upcoming meeting.

Before the BOJ’s decision on Friday, Japanese CPI inflation data for November is also on tap.

Broader Asian tech shares largely retreated, with tech remaining on the backfoot amid continued questions over steep AI-fuelled valuations.

KOSPI was the worst performer in the region, down 1.3%, while Hang Seng declined nearly 0.3%.

Chipmaking giant TSMC dropped 0.4% in Taipei trade, while losses in South Korean memory stock majors SK Hynix Inc and Samsung Electronics Co Ltd were somewhat limited by positive signals from Micron.

But markets at large remained largely cautious towards tech, amid persistent doubts over an AI-fuelled bump-up in valuations over the past two years. Frothy valuations also spurred a heavy dose of profit-taking in tech.

Among other Asian markets, Shanghai Shenzhen CSI 300 index slipped 0.7%, while the Shanghai Composite was flat. Chinese markets whipsawed in recent sessions amid speculation over Beijing’s plans for more stimulus measures, especially following a swathe of weak economic readings for November.

Australia’s ASX 200 slid 0.2%, while Singapore’s Straits Times index was flat.