Tokyo stocks fell Friday, dragged down by Wall Street declines and selling of technology and real estate issues on concerns over higher borrowing costs as Japan's benchmark government bond yield continued to rise.
The 225-issue Nikkei Stock Average ended down 457.11 points, or 1.17 percent, from Thursday at 38,646.11. The broader Topix index finished 12.21 points, or 0.44 percent, lower at 2,742.54.
On the top-tier Prime Market, decliners were led by securities house, mining and real estate issues.
The U.S. dollar was firm in the lower 157 yen zone in Tokyo on prospects that the U.S.-Japan interest rate differential will remain wide amid persistent inflation in the United States following stronger-than-expected economic data, dealers said.
The yield on the benchmark 10-year Japanese government bond briefly gained 0.005 percentage point from Thursday's close to 1.005 percent, its highest level since April 2012, after U.S. long-term Treasury yields climbed overnight on the solid economic data.
The debt also came under selling pressure, sending yields higher, amid speculation that the Bank of Japan is moving to normalize its monetary policy after it unexpectedly offered on May 13 to buy a smaller amount of bonds in a regular operation.
Stocks opened sharply lower as sentiment was dampened by Wall Street declines overnight on receding prospects of interest cuts by the Federal Reserve in coming months amid stubborn inflation, analysts said.
"Japanese stocks were dragged down by falls in U.S. shares due to strong economic data" that signaled prolonged inflation in the world's largest economy, Seiichi Suzuki, chief equity market analyst at the Tokai Tokyo Intelligence Laboratory Co.
The market was further pressured by the continued rise in Japan's benchmark government bond yield, fueling concerns about higher housing loans and borrowing costs, they said.
