TOKYO: Tokyo stocks fell 0.72 percent on Tuesday as the yen strengthened and concerns over a Chinese liquidity crisis spurred late selling.
The benchmark Nikkei 225 index closed down 93.44 points at 12,969.34, while the Topix index of all first-section shares slid 1.01 percent, or 10.98 points, to 1,078.66.
After a slow start Tuesday morning, activity picked up as the yen weakened, despite losses on Wall Street that were fuelled by a sell-off in Treasuries and worries over a liquidity crisis in China's banks.
But the early gains were eroded as the yen picked up, sending the dollar back to 97.48 yen in afternoon trade from 97.74 yen in New York late Monday. A stronger yen dampens Japanese exporter's prospects and tends to send their shares down.
The Nikkei's fall also came after Shanghai shares added to a 5.30 percent drop Monday on fears over a cash crunch after China's central bank told lenders to get their houses in order and indicated it would not provide fresh money to financial markets.
"China-linked shares were affected by the recent concerns over the Chinese economy," said Katsuhiro Kondo, a broker at Tokai Tokyo Securities.
"A full recovery in the Tokyo stock market depends on a return of foreign investors, who played a key role in the market's quick gains earlier this year."
Referring to China's liquidity squeeze, National Australia Bank said: "The (central bank) remains reluctant to intervene and said that the onus was on lenders to better manage their balance sheets and that liquidity was at a 'reasonable level,'"
"The risks to the Chinese growth outlook are rising, but it looks like the new leadership in China may be willing to accept some short-term pain in an attempt to address the financial risks in the banking system."
In Tokyo trade, Hitachi fell 0.15 percent to 625 yen, Canon was unchanged at 3,250 yen, Toyota fell 1.39 percent to 5,670 yen and Sony rose 0.35 percent to 1,973 yen.
Some China-linked shares fell sharply with mining and construction giant Komatsu losing 3.83 percent to end at 2,129 yen. (AFP)
