Tokyo stocks dropped Thursday morning as investors sold technology shares after losses in their U.S. counterparts overnight.
The 225-issue Nikkei Stock Average fell 254.54 points, or 0.65 percent, from Wednesday to 38,953.49. The broader Topix index was down 16.69 points, or 0.62 percent, at 2,658.26.
The U.S. dollar fell to the upper 149 yen range after Bank of Japan board member Hajime Takata expressed a positive outlook on achieving Japan's 2 percent inflation goal, fueling speculation the central bank could soon end its negative interest rate policy.
At noon, the U.S. dollar fetched 149.80-82 yen compared with 150.64-74 yen in New York and 150.74-75 yen in Tokyo at 5 p.m. Wednesday.
The euro was quoted at $1.0836-0837 and 162.32-36 yen against $1.0833-0843 and 163.26-36 yen in New York, and $1.0823-0824 and 163.15-19 yen in Tokyo late Wednesday afternoon.
The Nikkei benchmark dipped below 39,000 for the first time since it started climbing to record highs on Feb. 22, as the market took a breather ahead of U.S. inflation-related data due out later in the day, analysts said.
But with optimism about Japanese equities unchanged, the downside is likely to be limited with investors stepping in to buy stocks as soon as the Nikkei drops below the 39,000 threshold, said Yutaka Miura, senior technical analyst at Mizuho Securities Co.
