TOKYO: Japanese stocks dropped 1.43 percent Monday as investor sentiment was hit by bond rating downgrades for France and other European nations, brokers said.
The Nikkei index at the Tokyo Stock Exchange fell 121.66 points to close at 8,378.36. The Topix index of all first-section shares lost 1.27 percent or 9.36 points to 725.24.
"The (Nikkei's) fall at the open was bigger than expected," Monex senior market analyst Toshiyuki Kanayama told Dow Jones Newswires.
"The wait-and-see mood from this point will likely continue through the afternoon, as Wall Street is closed on Monday," for a national holiday, he said.
Euro-related shares were lower on a weak single currency, sending down high-tech exporters. Kyocera was down 1.92 percent at 6,100 yen with Canon down 2.23 percent at 3,280 yen. Financials also eased following weak US bank shares, with Mizuho Financial Group falling 1.83 percent to 107 yen and Mitsubishi UFG Financial Group losing 2.69 percent to 325 yen.
The euro recovered slightly in Tokyo afternoon trade, trading at $1.2646 compared with $1.2624 in New York late Friday. It rose off its intra-day low against the Japanese unit to trade at 97.12 yen, but remained below 97.20 yen in New York.
Global markets were under pressure after Standard & Poor's stripped France and Austria of their top triple-A ratings and downgraded seven other eurozone members.
Friday's downgrades had been mostly anticipated, but analysts said the move showed the region's debt crisis was worsening.
Bank of Japan governor Masaaki Shirakawa said Monday the European sovereign debt problem was the biggest risk to the Japanese economy.
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