Tokyo stocks close 1.07pc lower

The benchmark Nikkei-225 index of the Tokyo Stock Exchange ended 93.40 points lower at 8,639.61. The Topix index finished down 8.15 points, or 1.09 percent, at 742.24.

Moody's on Wednesday downgraded most major Japanese banks after it cut Japan's rating by one notch on concerns about its ability to address the industrialised world's biggest debt.

Hiroyuki Fukunaga, CEO of Investrust, said Tokyo stocks lost ground as investors expected US stocks would fall back after a sharp rally the previous day.

"The stubbornly strong yen and softened sentiment following the Moody's downgrade of Japan government bonds is also contributing to the decline," he told Dow Jones Newswires.

The Japanese finance minister's lunch break press conference to announce new steps to combat the yen's rise presented no surprises, said Naoki Fujiwara, a fund manager at Shinkin Asset Management.

Yoshihiko Noda announced a $100 billion facility aimed at helping to weaken the yen after it last week hit a post-war high against the dollar on global economic fears.

But markets were not too impressed, with the yen strengthening against the dollar on the news.

Fujiwara said that more investors may unwind their positions ahead of a key speech by Federal Reserve Chairman Ben Bernanke on Friday.

"Expectations are now so high (for some kind of easing action) that if he falls short, there will inevitably be a sharp drop (in equities markets) next week. Many people don't want to take that risk," Fujiwara said.

In New York on Tuesday the Dow Jones Industrial Average packed on 2.97 percent, boosted by growing hopes that the US Federal Reserve would take more aggressive easing measures to kick-start a sluggish economy.

Copyright AFP (Agence France-Presse), 2011