Tokyo stocks dropped Monday as a wide range of issues were sold on global economic uncertainty fueled by escalating conflict in the Middle East, but the downside was capped as a weakening yen spurred buying on dips.
The 225-issue Nikkei Stock Average ended down 290.75 points, or 0.74 percent, from Friday at 39,232.80. The broader Topix index finished 6.44 points, or 0.23 percent, lower at 2,753.20.
On the top-tier Prime Market, decliners were led by pharmaceutical, air transportation, information and communication issues.
The U.S. dollar notched a fresh 34-year high in the upper 153 yen zone in Tokyo, as Japanese importers bought the currency for settlement purposes.
While the yen is perceived as a safe-haven asset, the currency market showed limited reaction after Iran unleashed a barrage of what it called retaliatory missile and drone strikes against Israel over the weekend, dealers said.
"Although there may still be some instability ahead, the market viewed it challenging for Israel to act since Iran has signaled a desire to de-escalate," said Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities Co.
Stocks remained in negative territory throughout the day, as investors offloaded shares amid the heightened geopolitical tensions, analysts said.
The market recovered some of its losses later in the day as investors took advantage of the dip, encouraged by a rebound in U.S. stock futures after declines on Wall Street late last week.
"Even if geopolitical risks increase, companies that benefit from rising commodity prices are being bought today," said Makoto Sengoku, senior equity market analyst at Tokai Tokyo Intelligence Laboratory Co.
