TOKYO: Tokyo stocks tumbled 2.63 percent on Tuesday, following another negative lead from Wall Street as speculation mounts that the US Federal Reserve will soon start to scale back its stimulus programme.
The benchmark Nikkei 225 index closed 361.75 points lower at 13,396.38 as the yen strengthened against the dollar, while the broader Topix of all first-section shares gave up 2.08 percent or 23.86 points to 1,125.27.
"Amid a lack of trading cues and risk-off sentiment, retail investors are driving the market, trading primarily non-blue chip companies," said Takuya Takahashi, senior strategist at Daiwa Securities.
He said he expected subdued trading to continue for the rest of the month owing to an absence of catalysts.
"Domestically, news related to consumption tax hikes, corporate tax cuts, and growth strategies could be potential drivers," he told Dow Jones Newswires.
"Globally, trading cues are lacking until a series of US economic indicators' release in September ahead of the Federal Reserve's policy meeting," he said.
US shares extended their losses Monday on the back of mediocre economic data, disappointing retail earnings and higher bond yields as investors bet that the Fed will soon begin reeling in its $85-billion-a-month monetary easing programme.
The Dow fell 0.47 percent, the S&P 500 lost 0.59 percent and the Nasdaq was off 0.38 percent.
The Nikkei index lost ground further in late trading as foreign investors cashed in on their recent gains, brokers said.
"But I don't think today's fall is a sign of the beginning of a fresh selling trend," said Katsuhiro Kondo, a broker at Tokai Tokyo Securities.
In forex trade the dollar stood at 97.31 yen, down from 97.56 yen in New York Monday, while the euro bought $1.3338 and 129.88 yen, compared with $1.3334 and 130.09.
Among major shares, Toyota Motor fell 2.53 percent to 6,160 yen and Sony slipped 2.43 percent to 1,927 yen.
Olympus was down 1.55 percent at 2,842 yen and Mitsubishi UFJ Financial Group fell 1.50 percent to 588 yen. (AFP)