TOKYO: Tokyo shares fell 2.12 percent Thursday, as a stronger yen helped pull down the market and questions swirled about whether Tokyo would usher in a corporate tax cut.
The benchmark Nikkei 225 index lost 297.22 points to 13,752.94, while the Topix index of all first-section shares fell 1.67 percent, or 19.52 points, to 1,151.82.
Investors turned cautious after Finance Minister Taro Aso expressed doubts about possibility of a fresh corporate tax cut.
The comment came as a response to a recent media report that Prime Minister Shinzo Abe had told government agencies to study the possibility to encourage private sector investment.
Aso pointed out that much of Japan's business establishment pays no corporate taxes, and reducing the tax rate "would do little to help the Japanese economy".
Chief Cabinet Secretary Yoshihide Suga also denied that Abe has issued such an instruction.
The comment prompted investors to dump the dollar for the yen, seen as a safe haven currency.
But a higher yen generally weighs on Tokyo shares as it makes Japanese exports more expensive overseas.
The Tokyo bourse was also dragged down by Wall Street's weak showing and rekindled jitters about the end of the US Federal Reserve's stimulus programme.
The Dow Jones Industrial Average ended down 113.35 or 0.73 percent at 15,337.66.
The Nikkei also fell on profit-taking after the index's sharp two-day runup.
Trading was thin, with many players away for summer vacation, traders added.
"There are almost no wholly new trading incentives to speak of and participation rates are set to stay low until the Obon holiday season plays out," Naoki Fujiwara, fund manager at Shinkin Asset Management, told Dow Jones Newswires.
Among major shares, Toyota lost 1.56 percent to 6,310. Sony fell 1.60 percent to 1,968.
Mitsubishi UFJ Financial Group fell 1.14 percent to 605. (AFP)
