Tokyo stocks plummeted Wednesday, with the Nikkei suffering its largest drop since September 2022, hit by concerns over the downgrading of U.S. debt by a major credit rating agency and moves to lock in gains after the benchmark climbed to a one-month high.

The 225-issue Nikkei Stock Average ended down 768.89 points, or 2.30 percent, from Tuesday at 32,707.69, after losing over 800 points at one point. The broader Topix index finished 35.60 points, or 1.52 percent, lower at 2,301.76.

Decliners were led by insurance, securities house, and electric power and gas shares.

The U.S. dollar was mostly in the upper 142 yen range in Tokyo after the currency reached the mid-143 yen level in New York overnight, a one-month high, following sharp rises in U.S. long-term interest rates amid a more positive outlook for the U.S. economy, dealers said.

A financial data screen in Tokyo shows the Nikkei Stock Average plummeting over 700 points at one point on Aug. 2, 2023. (Kyodo) 

At 5 p.m., the dollar fetched 142.63-65 yen compared with 143.29-39 yen in New York and 142.71-73 yen in Tokyo at 5 p.m. Tuesday.

The euro was quoted at $1.0990-0991 and 156.76-80 yen against $1.0979-0989 and 157.40-50 yen in New York, and $1.0979-0980 and 156.69-73 yen in Tokyo late Tuesday afternoon.

The yield on the benchmark 10-year Japanese government bond rose 0.035 percentage point from Tuesday's close to 0.625 percent, the highest level since April 2014, after the Bank of Japan decided on Friday to allow the long-term yield to rise above its 0.5 percent cap toward 1.0 percent.

Stocks were lower from the outset, led by heavyweight technology-related shares, which tracked overnight declines by their U.S. counterparts. Selling also took place after the Nikkei added more than 700 points earlier in the week, analysts said.

Sentiment was dampened after the United States' credit rating was downgraded for the first time in 12 years by Fitch Ratings Inc., with the agency citing deteriorating fiscal conditions and the political turmoil that occurred while negotiations were being held to raise or suspend its debt ceiling.

"As the Nikkei rose above the 33,000 mark the previous day, stocks became prone to profit-taking, while the U.S. credit rating downgrade and rising U.S. interest rates led to a sell-off in high-tech stocks" in the United States and Japan, said Shingo Ide, chief equity strategist at the NLI Research Institute.

Among heavyweight semiconductor issues, Tokyo Electron dropped 700 yen, or 3.2 percent, to 21,145 yen, while chip-testing equipment maker Advantest plunged 910 yen, or 4.5 percent, to 19,400 yen.

Bucking the downward trend, Toyota Motor was up 57.0 yen, or 2.3 percent, to 2,502.5 yen, after reporting that its operating profit exceeded 1 trillion yen for the April-June quarter, a quarterly record for a Japanese company.