The Nikkei stock average slid below 8400 to its lowest level in more than a month, after surging bond yields in euro zone nations spooked investors and fuelled fears of tightening global credit conditions.
Shares of Olympus Corp snapped four days of gains, tumbling 17%. Japanese prosecutors are set to question a former president of disgraced Olympus Corp over an accounting scandal engulfing the firm, as investigators probe for possible involvement of organised crime, media reports said.
In Europe, the premium of Spanish and French bonds over German Bunds hit euro-era highs after poor demand at debt sales.
In a sign that global funding strains may spread to Asia, benchmark three-month euroyen interest rates futures fell to an eight-month low on Friday on concerns that tightness in dollar money markets may prompt non-Japanese banks to raise yen at a higher rate.
Concerns about a global credit crunch weighed on banking shares, with Mizuho Financial Group falling below ¥100 for the first time since 2003.
But strategists said the Nikkei’s ability to stay above support at the October 5 intraday low of 8343 was a positive sign that the market could be forming a bottom above the March 15 low at 8227.
With worries about Europe and US stock losses, it’s difficult to be optimistic about gains, but the Nikkei could be set to trade sideways into next week, depending on overseas developments, said Toshiyuki Kanayama, senior market analyst at Monex Inc.
Wednesday is a Japanese holiday next week, which could keep trading volume thin, market participants said.
The Nikkei fell 1,2% to 8 380,87, on track for a weekly loss of 1,6%. The broader Topix index shed 1% to 720,18, also set to fall 1,2% for the week.
Volume was thin, with 1,15 billion shares trading on the main board, poised to fall short of Thursday’s 1,52 billion shares and last week’s average volume of 1,74 billion.
Olympus tumbled 17% to ¥620.
The New York Times reported that Japanese officials are investigating an apparent $4,9bn hole in the company’s accounts as well as the possible involvement of organised crime in its accounting scandal.
Mitsubishi UFJ Financial Group units have sold some of their shares of the scandal-hit company, reducing their collective stake in Olympus to 7,61% from 10%, according to a regulatory filing on Friday.
Mitsubishi UFJ shares fell 1,8%, while rival Sumitomo Financial Group dropped 3%.
Shares of Mizuho dropped 1% to ¥100, after earlier slipping below ¥100 for the first time in eight years.
Export-reliant automakers underperformed the broad market, with the dollar below ¥77,00 and the yen near a five-week high against the euro.
Toyota Motor Corp was down 2,2% at 2448 yen after earlier dropping to 2442 yen, its lowest since 1996. It was the fourth-heaviest traded issue by turnover on the main board.
Honda Motor Co shed 2,2% and Nissan Motor Co
The yen’s strength is forcing Toyota and Nissan to consider changes in production plans and alliance strategies, the top executives of both firms said on Thursday.