TOKYO: Tokyo stocks closed lower Tuesday as speculation over a Taiwan visit by US House Speaker Nancy Pelosi fanned China-US tensions and strengthened the yen against the dollar.

The benchmark Nikkei 225 index dropped 1.42 percent, or 398.62 points, to end at 27,594.73, while the broader Topix index lost 1.77 percent, or 34.62 points, to 1,925.49.

The dollar fetched 130.67 yen in late Tokyo hours, down from 131.32 yen in early Asian trade and from 131.61 in New York on Monday.

“Sell orders aimed at avoiding risks emerged” in Tokyo trade after losses on Wall Street, with the “rapid appreciation of the yen against the dollar amplifying a risk-off mood”, Okasan Online Securities said.

Reports of a possible visit by Pelosi to Taiwan “stirred fears about deterioration of the US-China relationship, prompting further selling”, the brokerage said.

Tokyo stocks close higher with eyes on earnings

A possible meeting between Pelosi and Taiwanese President Tsai Ing-wen is sure to anger Beijing, which views the island as its territory.

While observers do not think the move will spark a conflict, US officials said China was preparing possible military provocations that could include firing missiles in the Taiwan Strait or “large-scale” incursions into Taiwan’s airspace.

Automakers were among losers in Tokyo, with Toyota slipping 2.60 percent to 2,154.5 yen, Honda sliding 0.78 percent to 3,449 yen, and Nissan ending down 2.25 percent at 507.3 yen.

ANA Holdings advanced 0.34 percent to 2,540.5 yen after it posted a quarterly net profit for the first time since the coronavirus pandemic began.

Its rival Japan Airlines fell 1.18 percent to 2,341 yen after it logged a net loss of 19.56 billion yen for April-June.