By Toma Mochizuki,
The Japanese yen tumbled to a fresh 20-year low against the U.S. dollar on Tuesday, sliding past the 128 line, amid prospects for a divergence in monetary policy between the Bank of Japan and the U.S. Federal Reserve.
At 5 p.m., the dollar fetched 128.06-08 yen compared with 126.93-127.03 yen in New York and 126.63-65 yen in Tokyo at 5 p.m. Monday.
The euro was quoted at $1.0801-0803 and 138.32-36 yen against $1.0776-0786 and 136.87-97 yen in New York and $1.0790-0792 and 136.64-68 yen in Tokyo late Monday afternoon.
The 225-issue Nikkei Stock Average ended up 185.38 points, or 0.69 percent, from Monday at 26,985.09. The broader Topix index finished 15.62 points, or 0.83 percent, higher at 1,895.70.
On the top-tier Prime Market, gainers were led by marine transportation, mining and transportation equipment issues.
Dollar buying was spurred by remarks from Federal Reserve Bank of St. Louis President James Bullard, who on Monday called for increasing interest rates to 3.5 percent by the end of the year to tame inflation.
His comments raised speculation that the U.S. central bank may become more aggressive in tightening its monetary policy as it attempts to tackle soaring inflation, analysts said.
The dollar accelerated its upswing against the yen in the afternoon to surpass 128 yen, its highest level since May 2002, from around the 127 yen line in the morning, additionally driven by the prospects of widening interest rate differentials between Japan and the United States.
Meanwhile, the market showed limited reaction to a remark from Japanese Finance Minister Shunichi Suzuki on Tuesday that the yen's rapid fluctuations are "undesirable."
Market participants have been seeking the dollar in recent weeks on the back of contrasting approaches by the Bank of Japan and the Fed, which last month decided to raise key interest rates for the first time since 2018.
The Japanese central bank, in contrast, has maintained its powerful monetary easing.
On the equities market, the Nikkei index initially opened higher to surpass the 27,000 mark on firm high-tech shares. But it later trimmed gains and briefly fell into negative territory, pulled down by Russia's intensifying onslaught on Ukraine and the upward trend of crude oil prices.
"Stocks were weighed down by Moscow's ongoing attacks on Ukraine, as investors worried about logistics disruptions and their increased negative impact on the global economy," said Shingo Ide, chief equity strategist at the NLI Research Institute.
West Texas Intermediate crude oil futures for May ended Monday at $108.21 per barrel, the highest level in around three weeks, as the climb extended to four trading days and continued to raise concerns over inflation.
Some investors are not optimistic about the upcoming earnings season in Japan, as elevated energy and commodity prices may limit revenue growth, Ide added.
Among Prime Market issues, advancing issues outnumbered decliners 1,253 to 505, while 81 ended unchanged.
Automakers were supported by the yen's depreciation, with Mazda Motor gaining 43 yen, or 4.9 percent, to 920 yen and Subaru advancing 38.5 yen, or 2.1 percent, to 1,836.5 yen, while Nissan Motor was up 19.8 yen, or 3.9 percent, at 526.3 yen.
Yoshinoya Holdings dropped 40 yen, or 1.7 percent, to 2,373 yen, as it said Tuesday an executive of its beef bowl restaurant chain has been dismissed over inappropriate remarks about young women.
Trading volume on the Prime Market rose to 961.96 million shares from Monday's 834.81 million.
The yield on the benchmark 10-year Japanese government bond was unchanged from Monday's close at 0.240 percent.
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Yen slips to fresh 20-year low in upper 126 zone against U.S. dollar
