TOKYO: Tokyo's benchmark Nikkei index dropped more than three percent Wednesday as market heavyweights Sony and Toyota plunged and after losses on Wall Street fuelled by worries over rising interest rates.

The Nikkei 225 shed 3.07 percent, or 866.21 points, to 27,391.04 shortly before the close, while the broader Topix index was down 3.06 percent, or 60.53 points, at 1,917.85.

Sony Group traded down as much as 12 percent 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 sector.

Tokyo stocks open lower, extending US falls

"Microsoft's move... triggered worries that competition in the game sector will further intensify," Chihiro Ota of SMBC Nikko Securities told AFP.

"If you consider things calmly, some people say it might not have the kinds of impact that many worry about."

Nonetheless, Ota added, the news "had a large impact and affected investor sentiment".

The market was also weighed down by losses for the world's top-selling car maker Toyota, which was down over 4.5 percent towards the end of the Tokyo trading day.

The firm said Tuesday that it no longer expects to meet its annual production target with operations hampered by the global chip crunch.

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