Tokyo stocks dropped Wednesday, as fears over a firming yen dented exporters and financial issues were sold on concerns over their earnings outlook amid lower Japanese long-term interest rates.
The 225-issue Nikkei Stock Average ended down 347.29 points, or 0.89 percent, from Tuesday at 38,490.17. The broader Topix index finished 39.26 points, or 1.41 percent, lower at 2,748.22.
On the top-tier Prime Market, decliners were led by insurance, mining and transportation equipment issues.
The U.S. dollar was weak in the lower 155 yen range mostly in the morning, as recent soft U.S. economic data reinforced the view that the Federal Reserve will cut interest rates as soon as September. But it later edged up to the mid-155 yen as Japanese importers bought the currency for settlement purposes, dealers said.
The yield on Japan's benchmark 10-year government bond briefly fell 0.040 percentage point from Tuesday's close to 0.990 percent, dropping below 1 percent for the first time in around two weeks, tracking a decline in long-term U.S. Treasury yields.
The debt had been sold recently, sending the yield higher, amid speculation that the Bank of Japan could further reduce its bond purchases as it moves to normalize its monetary policy.
Shares were weak as the yen's recent appreciation raised concerns of reduced overseas profits for exporters, while technology issues retreated following an overnight drop in a key U.S. semiconductor index, brokers said.
Financial-related issues that performed well recently also met selling after U.S. and Japanese long-term interest rates declined, stirring concern about its impact on their earnings, brokers said.
But the market is unlikely to keep sliding, as many Japanese companies are scheduled to hold shareholder meetings, fueling hopes for positive announcements, said Kenji Abe, chief strategist at Daiwa Securities Co.
"There may be announcements of enhanced shareholder returns or new product launches ahead of shareholder meetings," Abe said.
