Tokyo stocks dropped on Thursday morning in volatile trading with initial gains eroded as the yen continued to rally against the U.S. dollar, denting exporters.
The 225-issue Nikkei Stock Average fell 359.61 points, or 0.90 percent, from Wednesday to 39,731.17. The broader Topix index was down 6.58 points, or 0.24 percent, at 2,724.09.
The dollar briefly dropped to the mid-148 yen zone from the lower 149 range following its weaker tone overnight, as expectations grew that the Bank of Japan may end its negative interest rate policy at a meeting later this month.
The U.S. currency met selling pressure after U.S. Federal Reserve Chair Jerome Powell told House lawmakers that the central bank is on track to cut interest rates later this year.
At noon, the dollar fetched 148.75-78 yen compared with 149.36-46 yen in New York and 149.53-55 yen in Tokyo at 5 p.m. Wednesday.
The euro was quoted at $1.0898-0899 and 162.08-16 yen against $1.0892-0902 and 162.79-89 yen in New York and $1.0861-0862 and 162.41-45 yen in Tokyo late Wednesday afternoon.
The Nikkei rose more than 300 points to reach a new all-time intraday high on a Wall Street rise, but gains were gradually eroded with the index briefly dropping more over 400 points in tandem with the yen's appreciation.
"The yen's advance weighed down the market, pulling such transportation equipment issues such as automakers lower," said Maki Sawada, a strategist at Nomura Securities.
