The U.S. dollar hit a five-year high around the 117 yen line Friday after U.S. Treasury yields rose overnight on data suggesting an acceleration in inflation, while the Nikkei stock index plunged more than 2 percent.
At 6 p.m., the dollar fetched 116.95-117.00 yen compared with 116.08-18 yen in New York and 115.92-94 yen in Tokyo at 5 p.m. Thursday.
The euro was quoted at $1.0977-0979 and 128.38-47 yen against $1.0983-0993 and 127.54-64 yen in New York and $1.1064-1066 and 128.26-30 yen in Tokyo late Thursday afternoon.
The 225-issue Nikkei Stock Average fell 527.62 points, or 2.05 percent, from Thursday to close at 25,162.78. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 30.49 points, or 1.67 percent, lower at 1,799.54.
Decliners were led by transportation equipment, precision instrument and electric appliance issues.
The dollar rose to the upper 116 yen range in the afternoon, its highest level since January 2017, as it was sought on higher U.S. Treasury yields after U.S. government data showed Thursday inflation in February reached 7.9 percent, marking the steepest rise in over 40 years.
"Dollar buying was fueled by an expectation for the U.S. Federal Reserve to take a more hawkish stance in order to tackle inflation," said Yuji Saito, head of foreign exchange department at Credit Agricole Corporate & Investment Bank in Tokyo.
The U.S. dollar was pushed up further due to a divergence in monetary policies between the United States and Japan, as the Bank of Japan is keeping its ultraeasy policy intact, dealers said.
Investors are focused on the Fed's two-day policy meeting next week to gauge the U.S. central bank's next moves.
Meanwhile, Tokyo stocks tracked an overnight fall on Wall Street after the first face-to-face meeting between Ukrainian Foreign Minister Dmytro Kuleba and his Russian counterpart Sergey Lavrov in Turkey ended without progress amid Moscow's ongoing invasion.
The Nikkei index extended losses in the afternoon, briefly plunging over 700 points to fall below the 25,000 line, weighed down by declines in other Asian markets.
Investors also locked in gains a day after the benchmark logged its highest point rise in 21 months, brokers said.
On the First Section, declining issues outnumbered advancers 1,707 to 413, while 60 ended unchanged.
Shiseido sank 265 yen, or 4.6 percent, to 5,500 yen, after the cosmetics company said Thursday it would halt operations in Russia following the country's invasion of Ukraine.
Japan Tobacco declined 73.0 yen, or 3.5 percent, to 2,012.0 yen, after the firm said Thursday it would suspend some operations in Russia, a major market, adding there was a possibility it would halt its factories there.
High-tech issues were hit following a plunge in U.S. counterparts.
Screen Holdings lost 210 yen, or 2.0 percent, to 10,240 yen, Tokyo Electron fell 1,450 yen, or 2.7 percent, to 52,780 yen, and Advantest declined 390 yen, or 4.6 percent, to 8,150 yen.
Trading volume on the main section fell to 1,421.33 million shares from Thursday's 1,504.03 million shares.
The yield on the benchmark 10-year Japanese government bond inched down 0.005 percentage point from Thursday's close to 0.180 percent, as investors turned risk averse following the fall in Tokyo stocks and bought the safe-haven debt. Bond yields move inversely to prices.
