Japanese stocks fell 4 percent on Monday, with the Nikkei hitting a nearly six-week closing low as Honda Motor Corp and other exporters were battered by a strong yen amid growing US recession worries. Shares of Japanese consumer lender Takefuji Corp sank 6.6 percent to 2,490 yen after it said it may post a loss of up to 30 billion yen ($290 million) on a structured finance transaction hit by the global credit crisis
Credit worries battered other financial stocks, but the main market mover was the yen's surge against the dollar, which caused Tokyo to sharply underperform other Asian markets.
"Japanese stocks are very vulnerable to currencies, perhaps the most vulnerable of all the stock markets. Right now, the dollar is everything," said Masayoshi Okamoto, head of dealing at Jujiya Securities. "It's starting to look as if the markets may have to start factoring in a dollar worth 100 yen. This March could be very rough."
A stronger yen weighs on Japanese exporters as it cuts into the value of their overseas sales when translated back into yen, and March is the final month of the Japanese fiscal year - a crucial time for many company earnings. The dollar extended its slide to below 103 yen, hitting a three-year low as recession talk sparked a sell-off in Asian stocks and an unwinding of carry trades. At 0624 GMT it stood at 102.89 yen
The benchmark Nikkei shed 610.84 points, or 4.5 percent, to end at 12,992.18, its lowest close since January 23. The broader TOPIX ended down 53.13 points or 4 percent at 1,271.15, also its lowest close since January 23. In contrast, Asian stocks outside Japan, gauged by MSCI's index, were down 3 percent at 0625 US stocks tumbled on Friday as another round of weak economic data added to US recession worries and a record loss at insurer AIG underscored worries about more write-downs in the financial sector.
Worries about the Japanese economy were stoked by a report in the Nikkei business daily that Nippon Steel Corp, the world's second-biggest steelmaker, will likely fall short of its pretax profit forecast for the financial year to March 31, citing rises in raw material costs.
Nippon Steel fell 6.8 percent to 522 yen while Japan Steel Works was down 7.2 percent at 1,612 yen, helping to take the iron and steel subindex ISTEL.down 7 percent and making it the worst performer among the subindexes.
Exporters tumbled, battered by the yen. Honda fell 5.8 percent to 3,070, Toyota Motor Corp slid 3.3 percent to 5,560 yen, and Canon Inc was down 5.2 percent at 4,570 yen.
Financial firms tumbled as well, with Mitsubishi UFJ Financial Group down 4.7 percent at 902 yen, Mizuho Financial Group down 4.9 percent at 424,000 yen, and Sumitomo Mitsui Financial Group down 4.3 percent at 739,000 yen. Trade was moderate on the Tokyo exchange's first section, with 2.1 billion shares changing hands, in line with last week's daily average. Declining stocks outnumbered advancing ones by a ratio of nearly 18 to 1.