Tokyo stocks plunged Tuesday, led by the selling of technology issues on concern over higher borrowing costs amid rising long-term interest rates in the United States and Japan.
The 225-issue Nikkei Stock Average ended down 761.60 points, or 1.94 percent, from Monday at 38,471.20. The broader Topix index finished 56.09 points, or 2.04 percent, lower at 2,697.11.
On the top-tier Prime Market, decliners were led by marine transportation, oil and coal product, and insurance shares.
The U.S. dollar rose to a new 34-year high in the mid-154 yen level in Tokyo, after hotter-than-expected U.S. retail sales data reinforced bets that the Federal Reserve will keep interest rates elevated for longer than projected.
The yen has been recording lows against the dollar since June 1990, continuing its downward trend amid a wide interest rate differential as the Bank of Japan maintains an ultraloose monetary policy while the Fed tightens.
With investors turning to safer assets amid tensions in the Middle East, the retail sales price of gold hit an all-time high of 13,063 yen ($85) per gram in Tokyo, according to Japanese precious metal firm Tanaka Kikinzoku Kogyo K.K.
Stocks faced heavy selling throughout the day, with the Nikkei briefly plunging more than 2 percent, as technology stocks tracked losses among their U.S. counterparts amid concern about the impact of higher borrowing costs, analysts said.
Yields on 10-year U.S. Treasury bonds have climbed after recent stronger-than-expected economic data, while the yield on the benchmark 10-year Japanese government bond also rose Tuesday to its highest level since November 2023.
"There is the possibility of the BOJ raising interest rates in July. This is a negative for growth stocks," said Tomoichiro Kubota, senior market analyst at Matsui Securities Co., referring to technology issues.
But the market trimmed some losses later in the afternoon as dip-buying kicked in amid hopes tensions between Iran and Israel would die down, analysts said.
"There is a sense that both sides do not want to expand the conflict, so although things may change, there is not a particularly high possibility of a large-scale escalation," said Kubota.
