TOKYO (Kyodo) -- The Nikkei index sank over 1,000 points Friday, led by a sharp drop in chip stocks in cautious trading ahead of U.S. employment data due out later in the day and next week's U.S. presidential election next week.

The decline on the Nikkei benchmark index marked its largest point drop since Sept. 30. Analysts said fears of market volatility have risen as the U.S. race looks too close to call, while political uncertainty continues to affect sentiment in Japan after the ruling bloc lost its lower house majority in Sunday's general election.

The 225-issue Nikkei Stock Average ended down 1,027.58 points, or 2.63 percent, from Thursday at 38,053.67. The broader Topix index finished 51.25 points, or 1.90 percent, lower at 2,644.26.

On the top-tier Prime Market, decliners were led by nonferrous metal, transportation equipment and electric appliance issues.

The U.S. dollar briefly strengthened to the upper 152 yen range in Tokyo. Traders bought back the dollar after it quickly dipped to the upper 151 yen range on Bank of Japan Governor Kazuo Ueda's remarks Thursday signaling the central bank is closer to a further interest rate hike, dealers said.

At 5 p.m., the dollar fetched 152.54-56 yen compared with 151.97-152.07 yen in New York and 152.24-26 yen in Tokyo at 5 p.m. Thursday.

The euro was quoted at $1.0867-0869 and 165.77-81 yen against $1.0878-0888 and 165.40-50 yen in New York and $1.0859-0860 and 165.32-36 yen in Tokyo late Thursday afternoon.

The yield on the benchmark 10-year Japanese government bond ended at 0.940 percent, up 0.005 percentage point from Thursday. The debt was sold, sending yields higher, on the views that the BOJ could raise rates sooner than previously speculated.

Tokyo stocks slumped for a second consecutive day, with all but one sector posting declines.

Technology stocks led falls, tracking declines among Wall Street counterparts overnight, as sluggish earnings forecasts by some tech giants such as Microsoft Corp. stoked concerns that their large artificial intelligence investments could negatively impact future results.

Carmaker and other exporter issues remained under pressure, with analysts saying the comments from Ueda have fueled speculation of a December rate rise by the BOJ and a stronger yen in the long term.

Caution weighed on stocks further in the afternoon as investors locked in profits ahead of a three-day weekend in Japan and the release later in the day of U.S. nonfarm payrolls data for October that may offer clues to the timing of the next interest rate cut by the Federal Reserve.

"Investors fear U.S. markets may fall further. And while a presidential election result isn't likely in Japan until at least Wednesday, volatility risks are hurting sentiment," said Kazuo Kamitani, a strategist in the Investment Content Department of Nomura Securities Co.