The Nikkei 225 average fell back by more than 3.5 percent Monday to end at a six-week low, dampened by lower U.S. stock prices and a rise in the yen against other major currencies.
The Nikkei closed down 512.72 points, or 3.72 percent, at 13,261.82, the lowest finish since April 18, after gaining 185.51 points Friday. It suffered the third-biggest daily loss so far this year.
The Topix shed 38.83 points, or 3.42 percent, to end at 1,096.95 after edging 1.36 points higher Friday.
A wide range of stocks came under selling pressure following a tumble in the Dow Jones industrial average Friday amid growing fears that the U.S. Federal Reserve would start scaling back its quantitative easing early.
The Nikkei gave up more than 380 points in the morning due to plunges in its heavily weighted component issues, such as Fast Retailing and Softbank.
Though the key price indicator showed some resilience before the morning close, it resumed falling in the afternoon led by futures selling and extended losses by more than 500 points to end at the day’s low.
“Better than expected U.S. economic indicators released Friday have made investors worry that money inflow into the market could dwindle if the Fed begins to taper off its easing,” said Hiroichi Nishi, equity general manager at SMBC Nikko Securities Inc.
Export-oriented issues were sold on receding hopes for earnings recovery after the dollar dropped past ¥100.50 amid a growing risk-averse mood, brokers said.
The Nikkei has shed more than 15 percent since hitting the latest closing high of 15,627.26 on May 22.
“Some technical indicators now show signs of the market entering a ‘buy zone,’ ” Nishi noted.
Participants are awaiting key events both in Japan and abroad this week, which may give a boost to the market, brokers said.
Such events include the announcement of a third part of the Japanese government’s growth strategy Wednesday and U.S. economic indicators such as the Institute for Supply Management’s Manufacturing Index and the Labor Department’s jobs report, both for May, they said.
Losers overwhelmed winners 1,585 to 107 on the first section, while 25 issues were unchanged. Volume fell slightly to 4.090 billion shares from 4.154 billion Friday.
All 33 sector subindexes of the first section lost ground.
The brokerage sector became the top loser, with Nomura and Daiwa plunging 8.37 percent and 10.96 percent.
Real estate developers Mitsui Fudosan, Mitsubishi Estate and Sumitomo Realty & Development posted hefty losses, along with banking groups Sumitomo Mitsui, Mizuho and Mitsubishi UFJ.
Export-orient issues such as automaker Toyota and electronics maker Sony were also downbeat.
JGBs log tidy rise
Japanese government bonds rose sharply Monday as stocks plunged, with the key 10-year JGB yield briefly falling to a two-week low.
In late interdealer trading in cash JGBs, the yield on the latest 328th 10-year issue with a 0.6 percent coupon stood at 0.805 percent after falling as low as 0.8 percent at one point, its lowest level since May 17. The yield was at 0.860 percent late Friday.