By Ayano Shimizu,
Tokyo stocks ended sharply lower Thursday, with the benchmark Nikkei plunging nearly 3 percent to log its biggest drop since June 21, after the minutes of the Federal Reserve's December policy meeting fueled worries that U.S. monetary policy could be tightened sooner than expected.
The 225-issue Nikkei Stock Average ended down 844.29 points, or 2.88 percent, from Wednesday at 28,487.87. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 42.26 points, or 2.07 percent, lower at 1,997.01.
Decliners were led by precision instrument, electric appliance, and service issues.
The U.S. dollar fell to the upper 115 yen range from the lower 116 yen level in Tokyo as investors bought the Japanese currency, perceived as a safe-haven asset, following a sharp drop in Tokyo shares, dealers said.
At 5 p.m., the dollar fetched 115.87-89 yen compared with 116.05-15 yen in New York and 116.03-04 yen in Tokyo at 5 p.m. Wednesday.
The euro was quoted at $1.1289-1290 and 130.81-85 yen against $1.1306-1316 and 131.31-41 yen in New York and $1.1299-1300 and 131.11-15 yen in Tokyo late Wednesday afternoon.
The yield on the benchmark 10-year Japanese government bond rose 0.020 percentage point from Wednesday's close to 0.115 percent, its highest level in about nine months, as investors sold the debt on an overnight rise in U.S. Treasury yields. Bond yields move inversely to prices.
Stocks extended losses throughout the day to finish in negative territory for the first time this year, tracking sharp overnight falls on Wall Street, as the minutes of the Fed's last meeting in December turned out to be more hawkish than investors had expected, brokers said.
The Nikkei marked the largest drop since June 21 last year, when the index plunged over 3.2 percent, on fears of an early interest rate hike by the Fed.
Fed policymakers noted the possibility of raising interest rates sooner than they had originally anticipated, according to the minutes revealed overnight.
The minutes also showed some participants backed reducing the size of the U.S. central bank's balance sheet "relatively soon" after beginning the rate hikes as the country fights inflation.
"The minutes had a huge impact on the market especially as investors did not expect the Fed to consider shrinking the balance sheet at an early time," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co.
The recent increase in coronavirus cases in Japan also dampened investor sentiment. Air and land transportation issues met selling on fears over the pandemic's impact on the economy, brokers said.
Japanese Prime Minister Fumio Kishida is expected to declare a quasi-state of emergency on Friday for Okinawa, Yamaguchi and Hiroshima prefectures after infections surged there.
On the First Section, declining issues outnumbered advancers 2,012 to 138, while 35 ended unchanged.
Chip-related shares led decliners as they tracked U.S. counterparts after the tech-heavy Nasdaq index fell over 3 percent overnight.
Tokyo Electron fell 2,450 yen, or 3.6 percent, to 65,010 yen and Screen Holdings dropped 550 yen, or 4.3 percent, to 12,150 yen.
Among land and air transportation issues, Japan Airlines lost 50 yen, or 2.3 percent, to 2,147 yen and East Japan Railway declined 176 yen, or 2.5 percent, to 6,947 yen.
Trading volume on the main section fell to 1,210.64 million shares from Wednesday's 1,259.72 million shares.
