Japan shares closed lower on Thursday even as BOJ Governor Kazuo Ueda struck an upbeat tone on consumption and reaffirmed plans to shrink the bank's large balance sheet, signaling a shift from monetary stimulus.

The Nikkei 225 fell 0.08%, or 29.06 points, to close at 36,790.03.

Ueda said real wages and consumption should improve as import-driven inflation moderates and wages rise steadily.

The BOJ is expected to hold rates at next week's meeting but may consider a hike by May, depending on domestic inflation and US trade policy uncertainty, sources told Reuters.

Among corporate movers, Mitsubishi Electric (TYO:6503) aims for a 10% operating margin in its defense business by FY31, with FY25 orders forecast at 600 billion yen and a 7% margin.

It plans to strengthen missile defense and cross-domain operations under Japan's 43.5 trillion yen defense buildup.

Mitsui & Co. (TYO:8031) will invest 18 billion yen for a 50% stake in a 20 MW data center in Kanagawa Prefecture. The asset will be part of a new fund managed by Mitsui Realty.

LITALICO (TYO:7366) will sell its stake in nCS Inc. to E-Life Group for 800 million yen, closing March 31, to focus on disability welfare services.