Tokyo stocks ended lower for the third straight day on Wednesday, with the Nikkei hitting a two-month low, weighed down by concerns over the impact of high interest rates on the U.S. and Japanese economies.
The 225-issue Nikkei Stock Average ended down 509.40 points, or 1.32 percent, from Tuesday at 37,961.80, its lowest closing since Feb. 14. The broader Topix index finished 33.96 points, or 1.26 percent, lower at 2,663.15.
On the top-tier Prime Market, decliners were led by electric power and gas, oil and coal product, and mining shares.
The U.S. dollar remained firm mostly in the upper 154 yen level in Tokyo after hitting a new 34-year high of 154.79 yen in New York overnight, as Federal Reserve Chair Jerome Powell signaled high inflation is likely to delay the start of interest rate cuts.
The dollar later retreated to the mid-154 yen range amid wariness over a yen-buying intervention by Japanese authorities as it neared the 155 yen line, dealers said.
Stocks extended their losses as diminished hopes of early rate cuts by the Fed has led to rising long-term interest rates in the United States and Japan.
Growth stocks like tech in particular faced selling pressure as higher bond yields raise borrowing costs for companies.
"When bond yields rise, it naturally reduces the attractiveness of stocks, as bond holders will be able to receive high interest rates with little risks," said Koichi Fujishiro, senior economist at Dai-ichi Life Research Institute.
Meanwhile, the market saw some support from the weak yen, which increases exporters' overseas profits when repatriated, and dip-buying as the Nikkei approached the 38,000 line, analysts said.
"The market has undergone quite a bit of correction to reach a well-valued level," said Fujishiro.
