Tokyo stocks closed sharply lower today as investors sold export-oriented issues in response to the US dollar's recent declines.
The dollar traded just above its four-and-half-year lows against the yen, following a sell-off on Friday in New York over concerns over the large US trade deficit.
The Nikkei Stock Average of 225 issues shed 233.45 points, or 2.11 per cent, to close at 10,849.39 points. On Friday, the index gained 0.42 point, or negligible in percentage terms.
The dollar bought 103.27 yen early on Monday morning, down 0.91 yen from late Friday in Tokyo but above the 103.11 yen it bought in New York later that day — its lowest in four-and-a-half years.
Tokyo stocks plunged today due to the dollar's weakness against the yen. A weak dollar hurts Japan's economy by making Japanese exports to the United States more expensive, and erodes exporters' overseas earnings when they are converted back to yen.
The dollar fell to four-and-a-half-year lows against the yen, and came within an all-time low against the euro, after the top US central banker said at a conference in Frankfurt on Friday that the United States shouldn't be "complacent" about the growth of its current account deficit.
Swollen trade deficits eventually could threaten the US economy by souring foreign appetites to invest in the United States, Federal Reserve Chairman Alan Greenspan warned.