The Nikkei 225 Index has closed down 181.7 points at 11,345.08.
The fall was due to profit-taking of recent gains made on hopes for a cyclical recovery and after Prime Minister Mr Junichiro Koizumi seemed to rule out more anti-deflation measures.
The dollar was at 132.13 in Tokyo trading, up from 131.92 in late New York trading, and at 0.8819 against the euro, compared with 0.8828 in New York.
Government bond yields were higher, with bond No 236 yielding 1.41 per cent, up from 1.4 per cent at Wednesday's close; bond No 237 was yielding 1.47 per cent, against 1.445 per cent on Wednesday. The Tokyo market was closed yesterday.
The US 5-3/8 per cent 30-year bond was at 94-9/32, yielding 5.785 per cent, compared with 94-3/32, yielding 5.8 per cent in late New York trading.
PA