The Nikkei stock index ended down 2.7 percent Friday, hit by global economic concerns stemming from escalating conflict in the Middle East and semiconductor issues being dumped amid fears of a slowdown in growth in the industry.
The 225-issue Nikkei Stock Average finished down 1,011.35 points, or 2.66 percent, from Thursday at 37,068.35, suffering the largest point drop since Feb. 26, 2021. The broader Topix index ended 51.13 points, or 1.91 percent, lower at 2,626.32.
On the top-tier Prime Market, decliners were led by electric appliance, machinery and metal product shares.
The U.S. dollar recovered to the mid-154 yen range after plunging nearly 1 yen in Tokyo as the Japanese currency, perceived as a safe-haven asset, drew buying following media reports Friday that explosions had been heard at sites in Iran, Iraq and Syria and that Israel launched a retaliatory attack against Iran, dealers said.
At 5 p.m., the dollar fetched 154.47-49 yen compared with 154.60-70 yen in New York and 154.27-28 yen in Tokyo at 5 p.m. Thursday.
The euro was quoted at $1.0655-0656 and 164.59-63 yen against $1.0638-0648 and 164.56-66 yen in New York, and $1.0680-0681 and 164.77-81 yen in Tokyo late Thursday afternoon.
The yield on the benchmark 10-year Japanese government bond fell 0.035 percentage point from Thursday's close to 0.830 percent, as investors bought the safe-haven debt on heightened geopolitical tensions.
The Nikkei index briefly shed over 1,300 points, falling below the 37,000 line for the first time in over two months, as shares were sold across the board on news of Israel's attack.
"The reports led to a jump in crude oil prices and the buying of safer U.S. bonds, which decreased yields. The risk-off sentiment also triggered selling in stocks," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co.
Concerns about intensifying geopolitical tensions shook investors already discouraged by a lackluster outlook for the chip market by the world's largest contract chipmaker, Taiwan Semiconductor Manufacturing Co., analysts said.
Heavyweight semiconductor-related issues suffered heavy losses from the start of trading, with Tokyo Electron ending the day down 8.7 percent, while Advantest dropped 4.4 percent after TSMC cut its outlook for a market expansion in its earnings announced Thursday.
But the market avoided further losses in the afternoon after an Iranian official reportedly said the explosions in Iran were the result of the country's air defense systems being activated, and no missile attack had been carried out.
"It seems investors were taking a wait-and-see approach as they awaited further updates on the situation," said Ichikawa.
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