Japanese stocks posted fresh four-month lows on Thursday morning as the yen spiked against the dollar after U.S. President Donald Trump said the U.S currency was too strong, hitting automakers and tech shares hard.
The Nikkei 225 share average dropped 1.0 percent to 18,360.08 in midmorning trade, hitting as low as 18,304.72 earlier, the lowest level since Dec. 5.
The greenback took a heavy hit after Trump told the Wall Street Journal that the dollar "is getting too strong" and that he would prefer the Federal Reserve to keep interest rates low.
This week, Japanese stocks have already been hammered by escalated geopolitical concerns. Rising U.S. tensions with Russia, North Korea and Syria after U.S missile strikes in Syria last week and the moving of U.S. warships toward the Korean Peninsula have kept investors cautious.
The Nikkei has fallen 4.0 percent since the beginning of the year.
On Wednesday, Trump also said that his administration will not label China a currency manipulator, backing away from a campaign promise.
"Trump's big mouth...is creating volatility in the market," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, adding that short-term hedge funds might welcome the volatility, but a lot of other investors are cautious.
Eyes are also on next week's Japan-U.S. meeting led by Deputy Prime Minister Taro Aso and Vice President Mike Pence to discuss economic relations.
On Thursday, the Asahi Shimbun reported that the United States is pushing for trade to be a key issue in top-level economic talks with Japan.
The newspaper said that Washington's demand, made last week, did not specify any trade areas for discussion, but reported that a U.S. government source said the Trump administration mainly wants to discuss cars and agriculture.
Thursday's big losers included automakers, with Toyota Motor Corp shedding 1.6 percent, Mazda Motor Corp stumbling 2.6 percent and Subaru Corp declining 1.2 percent.
As the dollar hit a five-month low of 108.920 yen, other exporters were also battered on worries that the strong yen would hurt their earnings. Meanwhile, the latest Bank Of Japan tankan survey showed that big manufacturers expect the dollar to average 108.43 yen for this fiscal year.
Chip equipment makers, which had outperformed lately, languished. Advantest Corp dived 4.1 percent, while Tokyo Electron shed 2.8 percent.
Financial stocks, which hunt for high-yielding products, also lost ground after Benchmark 10-year Treasury yields at one point dropped 2.259 percent overnight, which was the lowest since Nov. 17.
Dai-ichi Life Holdings tumbled 2.8 percent, T&D Holdings slipped 2.7 percent and Mizuho Financial Group declined 1.6 percent.
The broader Topix fell 1.1 percent to 1,462.60 and the JPX-Nikkei Index 400 was down 1.2 percent to 13,114.20.