Japan's Nikkei ends lower on concerns over shaky US financial system

TOKYO, May 8 (Xinhua) -- Japan's benchmark Nikkei stock index closed lower Monday, as the yen's strength versus the U.S. dollar weighed on exporters amid renewed concerns over the health of the U.S. financial system.

The 225-issue Nikkei Stock Average dropped 208.07 points, or 0.71 percent, from Tuesday to close the day at 28,949.88.

The broader Topix index, meanwhile, lost 4.32 points, or 0.21 percent, to finish at 2,071.21.

The market mood was dampened by the yen's strength and the Dow Jones losing ground late last week, with banking shares tumbling on concerns over large deposit outflows that were similar in nature prior to the third major failure of a U.S. bank recently, California's First Republic Bank, local brokers here said.

"The market fell today partly due to the stronger yen, but also investor sentiment was weak as the Dow ended at a lower level on Friday compared with the beginning of the long weekend in Japan," Jun Morita, general manager of the research department at Chibagin Asset Management, was quoted as saying.

"There are also lingering worries about another failure of a bank in the United States," said Morita.

Masahiro Yamaguchi, head of investment research at SMBC Trust Bank, elucidated, saying that concerns over the health of the U.S. financial system remained as a global market concern, and more broadly, fears of a U.S. recession weighed heavily.

"Due to smoldering U.S. financial instability, investors were again wary about a slowdown in the world's largest economy," Yamaguchi said.

Following the U.S. Federal Reserve suggesting it might halt its monetary tightening policy, the yen spiked against the U.S. dollar, hurting exporters here, dealers said.

Typically, Japanese exporters rely on a weak yen versus its major counterparts so that overseas profits are boosted when repatriated and price competitiveness in foreign markets is enhanced.

Export-oriented issues losing ground on the yen's strength included Sony Group losing 1.9 percent, while Toyota Motor reversed 0.5 percent.

Among banks retreating amid a shaky U.S. financial situation, Mitsubishi UFJ Financial Group dropped 1.7 percent, while Mizuho Financial Group lost 1.2 percent.

Nikkei heavyweights weighed on the broader market, with technology investor SoftBank Group falling 0.1 percent, while Uniqlo clothing store operator Fast Retailing slumped 3.1 percent.

By the close of play, mining, bank, and oil and coal product-linked issues comprised those that declined the most.

The turnover on the Prime Market on the first trading day of the week came to 2,992.46 billion yen (22.16 billion U.S. dollars).

Markets here were closed from Wednesday to Friday for national holidays.