Tokyo stocks tumbled Monday with selling led by semiconductor heavyweights tracking falls in their U.S. counterparts and exporters hurt by a stronger yen.
The 225-issue Nikkei Stock Average ended down 868.45 points, or 2.19 percent, from Friday at 38,820.49, its largest single-day point drop since June 2021. The broader Topix index finished 59.97 points, or 2.20 percent, lower at 2,666.83.
On the top-tier Prime Market, decliners were led by mining, bank and securities house issues.
The U.S. dollar was weaker, trading largely in the upper 146 yen range in Tokyo on yen buying spurred by speculation that the Bank of Japan could move to end its negative interest rate policy in March.
At 5 p.m., the dollar fetched 146.73-75 yen compared with 147.04-14 yen in New York and 147.87-89 yen in Tokyo at 5 p.m. Friday.
The euro was quoted at $1.0941-0943 and 160.54-58 yen against $1.0935-0945 and 160.79-89 yen in New York and $1.0933-0934 and 161.67-71 yen in Tokyo late Friday afternoon.
The yield on the benchmark 10-year Japanese government bond ended at 0.760 percent, up 0.030 percentage point from Friday's close. The debt was sold, sending yields higher, amid speculation the BOJ could make a change to its monetary policy at its next meeting.
Stocks fell throughout the day, with the Nikkei benchmark index briefly dipping over 3 percent, or nearly 1,200 points. The index recently hit all-time highs, briefly surpassing the 40,000 mark, after topping record highs marked in 1989 on Feb. 22.
The market was hit by weak technology and chip-related issues, as investors moved to unload high-value stocks that had been lifted by expectations of growth from generative artificial intelligence after a key U.S. semiconductor index plunged Friday.
The yen's recent firmness against the dollar also drove the selling of export-related auto and machinery makers such as Toyota Motor and Komatsu, as a stronger yen raises the prospect of reduced overseas earnings when their profits are repatriated.
But even with the heavy falls, analysts saw the drop as an "adjustment" after the benchmark index's rapid climb in recent weeks.
The selling of technology shares "was not because of a downturn in economic conditions or falling semiconductor demand," said Masahiro Yamaguchi, head of investment research at SMBC Trust Bank.
"The firm yen is brought by the prospect of the BOJ normalizing its policy but it is unlikely that the central bank will start raising interest rates aggressively after that. It will not be a fundamental change that deserves pessimism," he added.
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