TOKYO: Tokyo stocks slipped Thursday morning after President Donald Trump threatened to pull out of a key trade agreement and to shut down the US government if Congress does not fund his plan to build a border wall with Mexico.
At a rally Tuesday in Phoenix, Arizona, Trump vowed to build the border wall even "if we have to close down our government" and to pull out of the North American Free Trade Agreement with Canada and Mexico.
The outburst raised new questions about Trump's ability to build consensus in Washington that would be crucial to pushing through market-friendly policies including tax cuts and infrastructure spending.
"President Trump's address in Phoenix unwound all the positive feeling that had been built around the prospect of a swift debt ceiling resolution and US tax reform," Rodrigo Catril, currency strategist at National Australia Bank, said in a commentary.
The dollar slumped against the yen as investors sought out safer assets with the greenback at 108.90 yen in early Asian trade. It later rebounded to 109.21 yen but it was still down from 109.56 yen the previous day.
A stronger yen is bad for the profitability of Japan's major exporters.
Tokyo's benchmark Nikkei 225 index lost 0.13 percent, or 25.84 points, to sit at 19,408.80 by the break, while the Topix index of all first-section issues edged down 0.07 percent, or 1.19 points, to 1,598.86.
Investors were also looking ahead to a meeting of central bankers featuring speeches by US Federal Reserve boss Janet Yellen and European Central Bank chief Mario Draghi on Friday.
In Tokyo trading Panasonic fell 0.34 percent to 1,454.5 yen, camera maker Olympus slipped 0.26 percent to 3,795 yen and Nintendo was off 0.50 percent at 35,770 yen.
Steelmakers fell after report said top buyer Toyota had negotiated price cuts. JFE Holdings tumbled 4.36 percent to 2,059 yen while rival Nippon Steel & Sumitomo Metal dropped 2.29 percent to 2,560 yen. Toyota was down 0.35 percent at 6,151 yen.
MS&AD Insurance Group was down 0.32 percent at 3,723 yen after announcing it would buy Singapore's First Capital Insurance for $1.6 billion.