TOKYO (AP) — Asian shares declined Tuesday, as investors around the world watched to see bank failures in U.S. history.

In Asia, direct exposure to the risks from the U.S. failures seemed slim, at least so far. Still, fears of contagion persisted, sending regional benchmarks lower across the region.

Japan’s benchmark Nikkei 225 dropped nearly 2.0% to 27,286.87, extending losses from the day before. Australia’s S&P/ASX 200 dipped 1.6% to 6,992.00. South Korea’s Kospi fell 1.9% to 2,365.18. Hong Kong’s Hang Seng fell 1.2% to 19,462.84. The Shanghai Composite declined 0.7% to 3,245.13.

“There is escalating tension in the global financial world; this is despite non-U.S. banks’ exposure to US regional banks being minimal, with the global systems being well capitalized and flush with liquidity,” Stephen Innes, managing partner at SPI Asset Management, said in a report.

“U.S. financial stress could lead banks of all stripes to retrench lending to the real economy and tighten broader financial conditions, amplifying risk to the broader markets.”

On Monday, Japan’s chief government spokesman, Hirokazu Matsuno, told reporters that the impact on Japanese banks would likely be limited.

However, bank shares fell sharply Tuesday. MUFG fell 6.3%, Mizuho Financial Group sank 5.8% and Sumitomo Mitsui Financial Group’s shares dropped 6.2%.

The biggest price decline so far on Wall Street this week appeared to be with banks. Other stocks rose on hopes the bloodletting will force the U.S. Federal Reserve to take it easier on the hikes to interest rates that are shaking Wall Street and the economy.

Investors are worried that a relentless rise in interest rates meant to get inflation under control are approaching a tipping point and may be cracking the banking system.

On Wall Street, the S&P 500 dipped 0.2% to 3,855.76 after whipsaw trading, where it careened from an early loss of 1.4% to a midday gain of nearly that much. The Dow Jones Industrial Average fell 0.3% to 31,819.14, while the Nasdaq composite rose 0.4% to 11,188.84.

The U.S. government announced a plan late Sunday meant to shore up confidence in the banking industry following the collapses of Silicon Valley Bank and Signature Bank since Friday.

The heaviest pressure is on the regional banks a couple steps below in size of the massive, “too-big-to-fail” banks that foundered in 2007 and 2008. Shares of First Republic Bank fell 61.8%, even after the bank said Sunday it had strengthened its finances with cash from the Federal Reserve and JPMorgan Chase.

Huge banks, which have been repeatedly stress-tested by regulators following the 2008 financial crisis, weren’t down as much. JPMorgan Chase fell 1.8%, and Bank of America dropped 5.8%.

Some investors are calling for the Fed to make cuts to interest rates soon to stanch the bleeding. Rate cuts often act like steroids for the stock market. The wider expectation, though, is that the Fed will likely pause or at least hold off on accelerating its rate hikes at its next meeting later this month.

That would still be a sharp turnaround from expectations just a week ago, when many traders were forecasting the Fed could go back to increasing the size of its rate hikes to tame stubbornly high inflation.

Now, “depending on reactions in financial markets and eventual fallout on the overall economy, we wouldn’t rule out that the hiking cycle could even be over and that the next move by Fed officials may be lower not higher,” said Kevin Cummins, chief U.S. economist at NatWest.

Higher interest rates can drag down inflation by slowing the economy, but they raise the risk of a recession later on. They also hit prices for stocks, as well as bonds sitting in investors’ portfolios.

Prices for Treasurys shot higher as investors sought safety and as their expectations grew for an easier Fed. That in turn sent their yields lower, The yield on the 10-year Treasury was steady at 3.56%, down from 3.70% late Friday. That’s a major move for the bond market.

The two-year yield, which moves more on expectations for the Fed, fell to 3.99% from 4.59% Friday. It was above 5% earlier this month.

In energy trading, benchmark U.S. crude lost 35 cents to $74.45 a barrel in electronic trading on the New York Mercantile Exchange. It fell $1.88 to $74.80 a barrel on Monday.

Brent crude, the international standard, lost 90 cents to $79.87 a barrel.

In currency trading, the U.S. dollar rose to 133.69 Japanese yen from 133.20 yen. The euro cost $1.0701 down from $1.0734.

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AP Business Writer Stan Choe contributed.