The Nikkei average hit a month-and-a-half low on Wednesday on selling stirred by political turmoil in Italy and rekindled concerns over a U.S.-China trade war.
The 225-issue Nikkei stock average ended down 339.91 points, or 1.52 percent, from Tuesday at 22,018.52. The broader Topix index of all first section issues on the Tokyo Stock Exchange finished 25.72 points, or 1.46 percent, lower at 1,736.13.
The slump was led by nonferrous metal, insurance, and glass and ceramic product issues.
Shares tracked an overnight plunge in U.S. and European stocks following reports that Italian President Sergio Mattarella’s pick for the post of prime minister failed to gain support from major political parties, prompting the Nikkei average to fall over 400 points at one point, brokers said.
“European investors are becoming risk averse and converting U.S. and Japanese stocks (they had invested in) into cash,” as Italy is not able to select a prime minister, said Yutaka Miura, senior technical analyst at Mizuho Securities Co.
Traders are assuming that a fresh election would strengthen Italy’s populist parties and result in a rise in the budget deficit. The situation could lead to falling Italian bond prices and decrease capital in the eurozone’s banks, eventually affecting the region’s economy, the brokers added.
The market was also affected by the White House’s statement Tuesday that a final list of Chinese imports valued at $50 billion to be hit with a 25 percent tariff will be announced by June 15.
“Traders grew cautious thinking a trade war would resume between China and the United States,” Miura added.
On the first section, declining issues outnumbered advancers 1,760 to 292, while 32 ended the day unchanged.
Investors boosted their holdings of the safe-haven yen as the geopolitical risks swirled, making the currency stronger.
Exporters took a beating as a strong yen reduces their overseas profits when repatriated. Steel producer JFE Holdings sank ¥60.50, or 2.6 percent, to ¥2,249.50, and industrial vehicle-maker Hitachi Construction Machinery fell ¥65, or 1.6 percent, to ¥3,955.
Bank issues declined on an overnight fall in long-term U.S. Treasury yields. Mitsubishi UFJ Financial Group dipped ¥23.30, or 3.4 percent, to ¥661.00, while Sumitomo Mitsui Financial Group slid ¥82, or 1.8 percent, to ¥4,471.
Trading volume on the main section rose to 1.593 billion shares from Tuesday’s 1.312 billion shares.