Tokyo stocks snapped a four-day winning streak Thursday, with the Nikkei briefly losing over 2 percent, on concerns that surging commodity prices may squeeze corporate profits and cause the global economy to slow down.

The 225-issue Nikkei Stock Average ended down 508.36 points, or 1.89 percent, from Wednesday at 26,402.84. The broader Topix index finished 24.61 points, or 1.31 percent, lower at 1,860.08.

On the top-tier Prime Market, decliners were led by marine transportation, insurance and service issues.

The U.S. dollar weakened and mostly traded in the upper 128 yen range as Japanese importers bought the unit for settlement purposes, dealers said.

At 5 p.m., the dollar fetched 128.22-23 yen compared with 128.18-28 yen in New York and 129.32-34 yen in Tokyo at 5 p.m. Wednesday.

The euro was quoted at $1.0492-0493 and 134.53-57 yen against $1.0456-0466 and 134.07-17 yen in New York and $1.0516-0517 and 136.00-04 yen in Tokyo late Wednesday afternoon.

The yield on the benchmark 10-year Japanese government bond was unchanged from Wednesday's close at 0.240 percent.

Stocks lost ground from the opening, with the Nikkei index briefly falling over 750 points, or nearly 3 percent, in the morning.

The fall in Tokyo equities came after the Dow Jones index logged its largest drop in almost two years following earnings results from major U.S. retailers Walmart Inc. and Target Corp. that were short of market expectations due to higher fuel and labor costs.

"Recent earnings reports in the United States have raised concerns about the global economy, as businesses struggle to make profits on soaring commodity prices," said Shingo Ide, chief equity strategist at the NLI Research Institute.

He added investors are becoming increasingly fearful of stagflation resulting from economic stagnation and inflation taking place simultaneously.

Although stocks were briefly weighed in the morning by the yen's strengthening overnight against the U.S. dollar, they trimmed losses as the Japanese currency changed course and gradually weakened throughout the day, analysts said.

The Nikkei index was also supported by bargain-hunting after the benchmark neared the 26,000 threshold, Ide said.

Among Prime Market issues, declining issues outnumbered advancers 1,313 to 468, while 56 ended unchanged.

Chip-related issues were lower after the technology-heavy Nasdaq index declined more than 4 percent overnight.

Tokyo Electron shed 2,040 yen, or 3.4 percent, to 57,660 yen, Advantest fell 180 yen, or 2.0 percent, to 8,610 yen and Screen Holdings dropped 150 yen, or 1.3 percent, to 11,600 yen.

Nippon Yusen sank 500 yen, or 4.9 percent, to 9,630 yen, as investors locked in recent gains, while reports that the firm was considering withdrawing its automobile land freight operations from Russia also raised worries about its profits.

Trading volume on the Prime Market fell to 1,264.39 million shares from Wednesday's 1,267.16 million.

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