Stocks pulled back, hit by selling to cash in on gains amid the yen’s appreciation against the dollar.
The Nikkei 225 average lost 208.12 points to close at 14,258.04 after closing out last week by soaring 460.39 points on Friday.
The Topix sagged 11.43 points to end Monday at 1,184.74.
The market kicked off the week with sharp losses after the yen strengthened against the dollar because U.S. government employment data for July, released Friday, fell short of market expectations.
The U.S. data showed that nonfarm payrolls increased by 162,000 from the previous month, against the market consensus expecting an increase of 184,000.
Selling to lock in profits and selling on a rally also weighed on stock prices after the Nikkei surged a combined 797 points Thursday and Friday, brokers said.
While a wait-and-see mood grew amid a dearth of fresh incentives, the key indexes accelerated their downswing in late afternoon trading as the yen firmed further against the dollar, brokers said.
The U.S. jobs data lifted sentiment in Tokyo by fueling hopes for continued fund inflows as the figures supported the view that the U.S. Federal Reserve may postpone scaling back its quantitative monetary easing policy, a move that was believed to start as early as next month.
Still, “market participants took a breather amid a heightened sense of caution over Nikkei’s rapid rise in a short period,” said Hiroichi Nishi, equity general manager at SMBC Nikko Securities Inc.
“Buying was focused only on issues of companies that announced rosy earnings reports,” said Masayuki Otani, chief market analyst at Securities Japan Inc.
Falling issues outnumbered rising ones 1,037 to 611 on the first section, while 105 issues were unchanged.
Trading was thin at 1.996 billion, as is usual during the dog days of summer.
Automakers Toyota and Mazda and electronics maker Hitachi came under selling pressure due to the stronger yen.
Insurers Dai-ichi Life and Tokio Marine lost ground, as did banking group Sumitomo Mitsui and brokerage firm Nomura.
On the other hand, warehouse operator Mitsui-Soko surged 4.72 percent after the company announced Monday afternoon an upward revision in its net profit forecast for the year ending in March 2014, brokers said.
Also on the plus side were electronics makers Sony and Toshiba, as well as nonbank lenders Aiful and Orient.
Boost for JGBs
Japanese government bonds rose Monday, attracting buying from investors relieved by weaker than expected U.S. employment data.
The lead September futures contract on 10-year JGBs closed up 0.36 point from Friday at 143.72. Volume fell to 15,461 contracts from 28,942.
In late interdealer trading in cash JGBs, the yield on the latest 329th 10-year issue with a 0.8 percent coupon stood at 0.770 percent, down from 0.815 percent late Friday.
JGBs were upbeat from the outset after a rally by U.S. Treasuries prompted by the July U.S. jobs report Friday showing a smaller nonfarm payroll increase than estimated by the market.