TOKYO - Tokyo shares fell 0.75 per cent Thursday as a stronger yen wiped out early gains after the Federal Reserve dampened expectations for a US interest rate hike in early 2015.
The Nikkei 225 at the Tokyo Stock Exchange was down 117.05 points at 15,478.93, after the benchmark index opened 0.55 per cent higher. The Topix index of all first-section shares slipped 1.10 per cent, or 14.07 points, to close at 1,260.78.
"Selling pressure emerged in late trading because of a strong yen, which erased the Nikkei's early gain," said Hikaru Sato, senior technical analyst at the investment strategy section at Daiwa Securities.
The dollar slipped to 107.85 yen (S$1.30) from 108.14 yen in New York. A stronger yen makes Japanese exporters less profitable.
"Depressed US interest rates benefit equities prices generally, but for Japan stocks a higher dollar is usually a necessary reason to buy major exporters," Shinkin Asset Management fund manager Naoki Fujiwara told Dow Jones Newswires.
The Nikkei rallied in the morning after the Fed minutes showed policymakers cautious about rushing into rate hikes, and worried that the dollar is rising too fast. There was also concern over slow growth in Europe, China and Japan as well as geopolitical tensions.
A string of upbeat US data in recent months has fuelled speculation the Fed will likely announce a rate rise before a mid-2015 timetable. Japanese shares got an initial lift after fresh data showed Japanese machinery orders - a key leading indicator of capital spending - rose for the third straight month in August, bucking a recent string of weak economic figures.
Toyota fell 0.19 per cent to 6,240 yen, while Japan Airlines was down 0.42 per cent at 2,845 yen.
Uniqlo clothing chain operator Fast Retailing jumped 1.49 per cent to 37,255 yen on upbeat expectations for its earnings results. Following the closing bell, however, the firm said net profit dropped 28.7 per cent for the year to August even as overall sales rose, mainly due to a strong performance at Uniqlo stores outside Japan.
Japan's largest restaurant chain operator Skylark fell 4.8 per cent on its debut.
Temporary staffing giant Recruit Holdings is set to start trading in Tokyo next week following a US$2 billion (S$2.5 billion) initial public offering.