A man walks past an electronic stock board showing Japan's Nikkei index. AP
Japanese shares slid to a 1-1/2 week low on Monday as worries over worsening ties between China and the United States soured investor mood, and a firmer yen weighed on exporters.
The benchmark Nikkei 225 index fell 0.16% at 22,715.85, its lowest closing since July 17.
Shares pared losses in the afternoon, however, as traders speculated the Bank of Japan would buy ETFs after a weak morning session.
Market sentiment continued to be hit by further deterioration in Sino-US relations, following the tit-for-tat closures of consulates in both countries.
The tense backdrop underpinned the safe-haven yen, with the currency rising as high as 105.38 yen to the dollar, a level unseen since March 16.
Exporters Mitsubishi Motors shed 3.24%, Toshiba Corp declined 2.16% and Honda Motor Co Ltd dropped 0.54%.
Among other individual shares, defence-related names gained due to tensions between the two largest economies.
Mine manufacturer Ishikawa Seisakusho Ltd rallied 6.23%, while flare manufacturer Hosoya Pyro-Engineering Co Ltd added 7.57%.
The largest percentage loss in the index was Nikon Corp , which fell 7.15% after Intel Corp shares signalled it may stop manufacturing its own chip components.
Other semiconductor-related companies were also bruised, with Screen Holdings Co Ltd slipping 1.81%, while Disco Corp and Alps Alpine Co Ltd lost 2.22% and 3.59%, respectively.
The broader Topix recouped its early losses to close up 0.24% at 1,576.69.
The plunge in eurozone business activity caused by lockdowns imposed to stop the spread of the coronavirus eased sharply last month as more businesses reopened and people ventured out, a survey showed on Friday.
World stock markets advanced Monday, helped by investor confidence in upcoming US quarterly earnings and the business outlook, and by hopes for progress towards a coronavirus vaccine, dealers said.
Japanese Finance Minister Taro Aso described the yen’s recent rise as “rapid” on Friday, signalling concern that a strong currency could add pain to an export-led economy already in recession because of the novel coronavirus.
A gauge of global equity markets rose to a new high on Friday as US consumer spending in July suggested a strong economic rebound lies ahead, while the Japanese yen surged on safe-haven buying after Prime Minister Shinzo Abe resigned for health reasons.
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