TOKYO: Tokyo stocks were down 2.21 percent Wednesday morning following an overnight plunge on Wall Street as weak US economic data overshadowed a deal to raise the debt limit and avoid default.
The benchmark Nikkei-225 index on the Tokyo Stock Exchange dropped 217.47 points to 9,627.12. The Topix index of all first-section issues lost 2.05 percent or 17.26 points to 826.70.
The market took a beating due to a continued string of bad news from the US and Europe helping lift the safe-haven yen, keeping it around 77 to the dollar -- a level that dents the earnings of exporters.
Weak US economic data fuelled the bearish mood, as did soaring borrowing costs for Italy and Spain that hit fresh euro-era highs amid concerns over European sovereign debts, brokers said.
"Concerns about the US economic outlook, which had earlier been shadowed by US debt talks, are coming to the forefront," said Takashi Ushio, general manager at Marusan Securities.
Hiroichi Nishi, general manager at SMBC Nikko Securities, also said "concerns about a US economic slowdown are increasing while worries continue over a possible downgrade in the US credit rating over the degree of deficit reduction."
US President Barack Obama signed into law a bill that raises the nation's debt ceiling and cuts the budget deficit by at least $2.1 trillion over the next decade.
But analysts say the deal does not put the US fiscal position on a sustainable path and may not prevent the country from losing its top-notch AAA credit rating.
In New York on Tuesday US stocks wiped out most of their gains for 2011, plunging as poor economic data overshadowed the debt-ceiling deal.
It was the eighth straight day of losses on US markets, their longest losing streak since October 2008, and saw the Nasdaq and S&P 500 indices close below the points at which they started the year, while the Dow was at its lowest since mid-March.
In Tokyo trade Toyota Motor sank 1.42 percent to 3,115 yen despite raising its full-year net profit target 39 percent from earlier forecasts.
Markets remained cautious about the outlook, with Goldman Sachs analysts noting the poor visibility on US total demand and sales share.
JPMorgan Securities analyst Kohei Takahashi wrote in a separate note: "The company has been gradually raising vehicle prices and lowering parts prices, but it has few options in the near term to counteract the yen's steep rise."
The dollar was trading at 77.22 yen in Tokyo late morning trade, not far from its post-World War II low of 76.25 yen touched on March 17.
Tokyo Electric Power Co., the operator of the crippled Fukushima Daiichi nuclear plant, fell 1.77 percent to 442 yen after parliament enacted a bill ensuring government aid for the firm's compensation to people affected by the nuclear crisis. Critics say the bill lacks specifics.
Copyright AFP (Agence France-Presse), 2011
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