TOKYO: Tokyo stocks fell 1.07 percent Thursday morning amid concerns over a crucial EU summit and after Standard & Poor's placed the European Union on watch for a downgrade of its AAA credit rating.
The Nikkei 225 index at the Tokyo Stock Exchange fell 93.02 points to 8,629.15. The Topix index of all first-section issues lost 0.92 percent, or 6.89 points, to 742.74.
The market reversed the previous day's gains as uncertainty over Europe's fiscal woes weigh on sentiment, said Kazuhiro Takahashi, general manager of investment strategy and research at Daiwa Securities.
"Nothing has really changed... Uncertainty remains over how far European Union leaders could go and whether the European Central Bank will expand its bond buying," he told Dow Jones Newswires.
The Nikkei has risen over the past week amid hopes that European leaders will come up with a solution to the region's debt crisis at their two-day talks in Brussels from Thursday.
But investors are not expecting fresh dramatic measures in the "long-term battle" to tackle the region's debt, said Yoshihiro Okumura, general manager at Chibagin Asset Management.
"Ideally, we want to see eurozone stability bonds or reinforced (European Central Bank) buying of bonds, but they may not get there this time," he said.
"Meanwhile, doing nothing will likely disappoint the market. Something in between is likely to emerge."
"People are getting ready for a long-term battle," he added.
S&P turned up the pressure on leaders Wednesday when it put the EU itself on negative credit watch citing the bloc's dependence on its 27 member states for its budget needs.
The move follows Monday's decision by S&P to put 15 of the 17 eurozone countries on negative watch.
Tokyo Electric Power, which operates the crippled Fukushima nuclear plant, fell 8.0 percent after a report that the government was moving to effectively nationalise the utility through a massive share purchase.
Scandal-hit camera and medical equipment maker Olympus added 2.84 percent following a 5.2 percent drop Wednesday, amid continuing concerns over its possible delisting from Tokyo's bourse.
The company, which has admitted hiding massive investment losses for years, has promised sweeping corporate reforms and said it was aiming to meet a December 14 deadline to release its earnings, and avoid a delisting.
On currency markets, the euro weakened slightly to $1.3408 and 104.12 yen in early trade, compared with $1.3413 and 104.15 yen in New York late Wednesday.
The dollar was flat at 77.65 yen.
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