TOKYO: Tokyo stocks closed down 1.26 percent on Monday, erasing early gains that were stoked by a solid victory for Prime Minister Shinzo Abe's ruling coalition in elections ahead of national upper house polls next month.
The benchmark Nikkei 225 index lost 167.35 points to 13,062.78, reversing a 1.42 percent rally at the opening bell.
The Topix index of all first-section shares was down 0.89 percent, or 9.76 points, to 1,089.64.
Early buying was also helped by gains on Wall Street Friday, while the dollar strengthened further against the yen, lifting exporters.
But the Nikkei slipped in the negative territory in afternoon trade on profit-taking and with few trading cues, analysts said. The drop followed falls on other Asian markets, driven by concerns over the Fed ending its massive stimulus drive and a liquidity crisis in China.
On Sunday, Japan's ruling Liberal Democratic Party (LDP) and New Komeito secured victories in the Tokyo metropolitan assembly election, seen as a litmus test for next month's election.
The win marked a vote of confidence in the premier's economy-boosting plan, known as "Abenomics", which has sharply weakened the yen since late last year through a mix of big government spending and aggressive monetary easing.
"Leading up to the upper house elections in parliament in July, this should reassure investors that the course of present government economic policy will be maintained," Hiroichi Nishi, general manager of equities at SMBC Nikko Securities, told Dow Jones Newswires.
But an equity trading director at a foreign brokerage said: "Despite more supportive external factors, the market is reflective of the broader theme of 'risk-off' sentiment that has already hurt emerging markets such as China."
Toyota fell 1.54 percent to 5,750 yen while Nintendo rose 1.86 percent to 10,950 yen.
Mobile carrier SoftBank was up 0.71 percent to 5,600 yen after the path was cleared for it to push on with a $21.6 billion takeover of US wireless giant Sprint Nextel when a rival bid was dropped.
Struggling electronics giant Sharp closed 2.66 percent lower at 401 yen. In the last hour of trading, the firm said it had completed the second part of a capital injection deal from US firm Qualcomm worth about 10.8 billion yen ($110 million).
In forex deals the dollar bought 98.27 yen, compared with 97.87 yen in New York late Friday. (AFP)
