TOKYO: Japanese stocks dived more than 5 percent on Wednesday, posting their biggest daily drop since the Brexit poll in June as investors ran for cover with television network projections showing Republican Donald Trump closing in on a shock victory in the U.S. presidential election.
The Nikkei dropped 5.4 percent to end at 16,251.54 after swinging wildly in positive and negative territory as the exit poll results from the U.S. vote rolled in.
The Nikkei volatility index jumped as much as 35 percent to 30.58, the highest since July 29.
The Tokyo stock market closed before the final results were out.
Investors are increasingly worried about the possibility of Trump adopting protectionist policies and backing out of international trade deals, which would be negative for some Japanese industries such as the auto sector, traders said.
The auto sector was the biggest loser on the board, slumping 6.7 percent. Toyota Motor Corp tumbled 6.5 percent, Honda Motor Co lost 7.8 percent and Nissan Motor Co dropped 6.0 percent.
"Strong pessimism weighs in the market, and the market would probably suffer extended drops for about a week," said Akio Yoshino, chief economist of investment management division at Amundi Japan.
He added that investors will focus on whether the government will be ready to announce measures to counter the impact on the market and the yen.
The dollar was down 2.6 percent at 102.350 yen after dropping more than 3 percent during a volatile day that saw it rise to 105.480 earlier.
A strong yen eats into the repatriated profits of Japanese exporters, weakening their ability to invest abroad.
High-beta financials were also battered, with Nomura Holdings shedding 6.2 percent and Mitsubishi UFJ Financial Group falling 5.9 percent.
Both trading volume and turnover in the cash market were heavy and hit the highest since February, with 3.8 billion shares, with a trading value worth 3.92 trillion yen, changing hands on the Tokyo Stock Exchange's first section.
Nikkei futures saw heavy trade as well, with 268,420 contracts transacted, the largest volume since August 2015 and the fourth largest ever.
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Markets had favoured Clinton as a status quo candidate who would be considered a safe pair of hands at home and on the world stage.
"Over time, the effects of the election on Japan and the rest of the world will depend on the actual path of U.S. policies," said Jeremy Osborne, investment director of Fidelity International in Japan.
Osborne added that the fate of the Trans Pacific Partnership (TPP) free-trade deal and closer ties with Russia are key policies which could be affected by the election result.
He added that despite this, major economic policy changes appear unlikely in the near term and the focus will return to the U.S. Federal Reserve's monetary policy and the prospects for a U.S. rate hike in December.
The broader Topix dropped 4.6 percent to 1,301.16, with all of its 33 subsectors in negative territory. The JPX-Nikkei Index 400 shed 4.6 percent to 11,662.18.
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