People walk past an electric quotation board flashing the Nikkei key index of the Tokyo Stock Exchange in front of a securities company in Tokyo. (AFP photo)
TOKYO - The Nikkei index plummeted more than 5% Wednesday and slipped close to the 16,000 line, as the growing possibility of Republican candidate Donald Trump winning the US presidential race rattled investor sentiment.
The 225-issue Nikkei Stock Average ended down 919.84 points, or 5.36%, from Tuesday at 16,251.54, its biggest one-day drop this year since June 24 when Britain voted to leave the European Union. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 62.33 points, or 4.57%, lower at 1,301.16.
Every industry category on the main section lost ground, led by transport equipment, marine transportation and equipment issues.
Tokyo stocks were initially on a firm note on growing speculation of a win for Democratic candidate Hillary Clinton.
But stocks gradually lost steam and fluctuated between gains and losses before turning sharply lower as results showing Trump taking key battleground states rolled in.
The Nikkei index shed more than 1,000 points at one point.
"There is now a high possibility of Trump winning and a 'Trump shock' has turned the market risk-off. Results are showing that he is doing much better than the markets had expected," said Yutaka Miura, senior technical analyst at Mizuho Securities Co.
"But it's still a tight race and the market will be kept on edge until the final outcome is known," Miura said.
Clinton is seen as maintaining the status quo and represents less change, while Trump has alarmed investors with his pledges to renegotiate trade agreements and criticism of the Japan-US security alliance in its current form. The Republican nominee has also questioned the effectiveness of the US Federal Reserve, clouding the outlook for the next interest-rate hike.
Mari Iwashita, chief market economist at SMBC Friend Securities Co, said stocks were being sold off on speculation that Trump's victory could create more uncertainty in the market given his messages and his "America First" stance.
"Removing the uncertainty injected into the market following a possible Trump victory could take a while" as investors do not know what to expect from a Trump presidency, Iwashita said.
The dollar rose to the lower 105 yen zone against the Japanese currency in the morning, underpinning investor sentiment and lifting export-related names.
But the US currency began to tumble in the final minutes of the morning session and further fell to the upper 101 yen range in the afternoon, dragging down Tokyo stocks.
On the First Section, declining issues outnumbered advancing ones 1,934 to 43, while nine ended the day unchanged.
The yen's surge dragged down export-related names.
Toyota Motor sagged 384 yen, or 6.5%, to 5,510 yen, Nissan Motor dropped 62.20 yen, or 6.0%, to 973.30 yen and Honda Motor tumbled 232.50 yen, or 7.8%, to 2,735.50 yen.
Nikon declined 108 yen, or 6.6%, to 1,539 yen after the precision machinery manufacturer cut Tuesday its group net profit forecast, projecting a net loss for fiscal 2016.
Japan Petroleum Exploration shed 150 yen, or 6.9%, to 2,036 yen after the oil developer downgraded Tuesday its profit projection for the current business year ending next March.
Trading volume on the main section rose to 3,810.19 million shares from Tuesday's 1,659.71 million shares.
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