The U.S. dollar briefly hit an almost five-year high near the 115 yen line on Wednesday after stronger-than-expected U.S. data boosted hopes for a brighter outlook for the world's largest economy, although the weaker yen weighed on Tokyo stocks amid concern over rising material costs.
The dollar advanced to 114.97 yen, its highest level since March 2017, before fetching 114.88-90 yen at 5 p.m. compared with 114.78-88 yen in New York and 114.26-28 yen in Tokyo at 5 p.m. Tuesday.
The euro was quoted at $1.1302-1304 and 129.84-88 yen against $1.1315-1325 and 129.92-130.02 yen in New York and $1.1379-1381 and 130.02-06 yen in Tokyo late Tuesday afternoon.
The 225-issue Nikkei Stock Average ended down 119.79 points, or 0.40 percent, from Tuesday at 29,688.33. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 12.49 points, or 0.61 percent, lower at 2,038.34.
Decliners were led by air transportation, service, and farm and fishery issues.
The U.S. currency remained firm against the yen throughout the day as Tuesday's data showed that U.S. retail sales and industrial output, both for October, beat market expectations. The outcome built on momentum from last week when data showed October U.S. consumer prices marked the biggest inflationary surge in nearly 31 years.
"Traders were relieved as higher retail sales showed strong consumer demand even as inflation pushed prices higher," said Takuya Kanda, senior researcher at the Gaitame.com Research Institute.
A string of upbeat U.S. macroeconomic data buoyed hopes that the U.S. economy is on track to recover and raised bets for earlier Federal Reserve interest-rate hikes, which could push up the dollar to 117 yen by the end of this year, Kanda added.
In the equities market, Tokyo shares spent most of the day in negative territory after a four-day winning streak through Tuesday, when the benchmark Nikkei index ended at a seven-week high.
"Although the weaker yen is good for some exporters, it served as an excuse for investors to lock in gains today on concerns over rising materials costs," said Yutaka Miura, senior technical analyst at Mizuho Securities Co.
Worries of higher fuel costs weighed on airlines, with Japan Airlines sliding 69 yen, or 2.8 percent, to 2,435 yen and ANA Holdings shedding 59.0 yen, or 2.1 percent, to 2,716.0 yen.
Bucking the downward trend, oil refiner Idemitsu Kosan rose 35 yen, or 1.2 percent, to 3,070 yen, and oil explorer Inpex gained 19 yen, or 1.9 percent, to 1,004 yen after the industry ministry said Tuesday it is eyeing subsidizing oil companies to curb rises in gasoline prices.
On the First Section, declining issues outnumbered advancers 1,706 to 410, while 67 ended unchanged.
Trading volume on the main section fell to 1,173.39 million shares from Tuesday's 1,190.59 million shares.
In the bond market, the yield on the benchmark 10-year Japanese government bond was unchanged from Tuesday's close at 0.070 percent.