Nikkei share average: Japan's Nikkei share average plunged by more than 1 per cent on Wednesday, driven by a downturn in heavyweight Fast Retailing, the owner of the Uniqlo store chain, and overnight losses on Wall Street.

As of the midday break, the Nikkei had lost 1.03 per cent, sliding to 39,428.58, after hitting its lowest point since March 18 at 39,217.04 earlier in the day.

Fast Retailing, dominating the index's weighting by a significant margin, witnessed a decline of 3.79 per cent, emerging as the primary drag on the market. Its slump contributed 172 basis points to the Nikkei's total decline of 410 points.

The stock retreated from a recent record high achieved earlier in the week following Fast Retailing's announcement late Tuesday of its first year-on-year sales drop at domestic Uniqlo outlets in three months.

Tech shares mirrored a downward trend among their US counterparts, although Japanese chip stocks saw limited impact from a powerful earthquake that struck Taiwan.

Big tech names such as chip-testing equipment maker Advantest fell by 1.34 per cent, while Nintendo suffered a loss of over 3 per cent. SoftBank Group, an investor focused on artificial intelligence startups, saw a decline of 1.39 per cent.

The tech sector tends to underperform when borrowing costs increase, a trend evidenced by the surge in US long-term Treasury yields (US10YT=RR) to their highest level since November, surpassing 4.4 per cent overnight.

The broader and less tech-weighted Topix index edged down by 0.49 per cent, with an index of growth stocks plummeting by 1 per cent while value shares remained relatively flat.

Shoki Omori, chief Japan desk strategist at Mizuho Securities, attributed the Nikkei's dip to profit-taking at the onset of Japan's new fiscal year this month. Despite the downturn, Omori expressed optimism about the market's potential to rebound.

Japan's stock benchmark achieved an all-time high of 41,087.75 on March 22, following the Bank of Japan's (BOJ) decision to raise interest rates for the first time since 2007 while maintaining a dovish stance on further tightening.

Omori suggested that unless US yields continued to rise and tech stocks continued to underperform, there could be a resurgence in the Nikkei, potentially testing the 41,000 mark this month.

"I don't think the Nikkei will go below 37,500," Omori added, stressing the importance for the BOJ to maintain accommodative financial conditions amid external pressures pushing equities lower.

(With Reuters inputs.)