By Toma Mochizuki,
Tokyo stocks extended Tuesday their losing streak to three days, briefly sending the Nikkei index down more than 2 percent, amid heightened concerns over the U.S. economy on expectations the Federal Reserve will more aggressively hike rates to curb inflation.
The 225-issue Nikkei Stock Average ended down 357.58 points, or 1.32 percent, from Monday at 26,629.86. The broader Topix index finished 22.61 points, or 1.19 percent, lower at 1,878.45.
On the top-tier Prime Market, decliners were led by air transportation, precision instrument and real estate issues.
The U.S. dollar was mostly weak in the lower 134 yen range as investors refrained from buying the unit on U.S. recession fears, as well as the overnight tumble in U.S. shares, dealers said.
But the currency briefly rose into the upper 134 yen zone after the Bank of Japan ramped up its bond buying operations to suppress long-term yields from tracking its soaring U.S. counterparts, highlighting its commitment to keeping in place powerful monetary easing in contrast with the United States.
At 5 p.m., the dollar fetched 134.42-44 yen compared with 134.39-49 yen in New York and 134.59-60 yen in Tokyo at 5 p.m. Monday.
The euro was quoted at $1.0467-0468 and 140.70-74 yen against $1.0400-0410 and 139.92-140.02 yen in New York and $1.0466-0467 and 140.87-91 yen in Tokyo late Monday afternoon.
The yield on the benchmark 10-year Japanese government bond was unchanged from Monday's close at 0.250 percent.
Tokyo stocks were sharply lower throughout the day following a Wall Street Journal report that the Fed is considering raising interest rates by 0.75 percentage point, up from the 0.50 percentage point consensus, as U.S. consumer price data for May released late last week showed higher-than-expected inflation, analysts said.
Interest rate hikes lead to higher borrowing costs for companies and households.
The Nikkei index briefly fell over 600 points, tracking Wall Street, which on Monday saw the Dow Jones index tank to its lowest level in over a year.
"Investors are starting to view a 0.75 percentage point hike as a certainty for July, as they priced in the possibility at a slightly excessive pace," said Makoto Sengoku, senior equity market analyst at the Tokai Tokyo Research Institute.
Market participants were concerned that the aggressive tightening could lead to a deceleration of the U.S. economy and subsequently reduce demand for Japanese exports including automobiles, he added.
Meanwhile, analysts said investors were also wary about potential monetary tightening in European countries and a slowdown of the global economy.
Among Prime Market issues, declining issues outnumbered advancers 1,403 to 382, while 53 ended unchanged.
H.I.S. dropped 146 yen, or 6.8 percent, to 2,013 yen, after the travel agency said Monday its net loss had increased in the November-April business period compared to a year earlier as demand continued to be hit by COVID-19 restrictions.
High-tech issues were sold after the technology-heavy Nasdaq index slumped over 4 percent overnight.
Fanuc fell 140 yen, or 0.7 percent, to 20,405 yen, Kyocera declined 61 yen, or 0.8 percent, to 7,222 yen, and Sumco slipped 17 yen, or 0.8 percent, to 2,023 yen.
Trading volume on the Prime Market rose to 1,260.90 million shares from Monday's 1,218.59 million.
