TOKYO: Sharp losses in market heavyweights Sony and Toyota helped drag Tokyo stocks lower Wednesday, tracking losses on Wall Street where worries mounted over higher interest rates.
The benchmark Nikkei 225 index was down 1.81 percent or 512.41 points to 27,744.84 at the break, while the broader Topix index lost 1.80 percent or 35.68 points to 1,942.70.
Sony Group plummeted 9.45 percent to 12,885 yen after Microsoft announced a landmark $69 billion deal to buy US gaming giant Activision Blizzard.
Acquiring the troubled but successful Activision, maker of the "Call of Duty" franchise, will turn Microsoft into the third-largest gaming company by revenue, behind Tencent and Sony -- a major shift in the booming sector.
"With Microsoft allowing its biggest and latest games to be played through its subscription service, Gamepass, Sony will have a monumental challenge on its hand to stand its own in this war of attrition," said Amir Anvarzadeh, a strategist at Asymmetric Advisors.
Morningstar Research analyst Kazunori Ito told Bloomberg News that "Sony will struggle to match Microsoft in terms of money it can spend" on popular titles.
However, Sony's rival Nintendo was up 1.44 percent at 54,180 yen while Square Enix jumped 5.02 to 5,640 yen.
The world's top-selling carmaker Toyota dropped 2.99 percent to 2,351 yen after it said on Tuesday that it no longer expects to meet its annual production target with operations hampered by the global chip crunch.
Other automakers were also lower, with Nissan falling 1.51 percent to 623.2 yen and Honda shrinking 1.56 percent to 3,456 yen.
In New York, the Dow Jones Industrial Average finished down 1.5 percent. The broad-based S&P 500 shed 1.8 percent, while the tech-rich Nasdaq Composite Index sank 2.6 percent.
"A sell-off of Japanese stocks is likely to be sparked after US shares fell on a sharp rise in US long-term interest rates," Mizuho Securities said in a note.
Worries are also growing over rising virus cases in Japan fuelled by the Omicron variant, as the government prepares to impose new restrictions on a large part of the country.
Chip-making equipment manufacturer Tokyo Electron dropped 5.78 percent to 61,770 yen at the break while chip-testing equipment maker Advantest tumbled 4.45 percent to 10,300 yen.