Tokyo stocks dropped nearly two percent at the opening Thursday following a plunge in New York, as US traders fretted about surging interest rates and the safe-haven yen climbed against the dollar.

The benchmark Nikkei 225 index was down 1.94 percent or 457.03 points at 23,049.01 in early trade, while the broader Topix index was down 1.90 percent or 33.49 points at 1,730.37.

Pedestrians walk past an electoronic board showing share prices on the Tokyo Stock Exchange (top C) and the world's major markets in Tokyo on August 13, 2018. (File photo: AFP)

Both indexes later extended losses, sinking by more than three percent during morning trade.

Traders would be avoiding risk-taking after the drop on Wall Street and a higher yen, strategist Yoshihiro Ito of Okasan Online Securities said in a commentary.

US shares plunged as worries about surging US interest rates and the impact of trade disputes prompted a broad-based selloff that slashed more than three percent from major indices.

US Treasury Secretary Steven Mnuchin warned China on Wednesday against engaging in competitive currency devaluations as the two countries wage a trade war, in comments published in the Financial Times.

There are several factors behind the recent fall in the Chinese currency, including economic issues in China, Mnuchin told the newspaper ahead of meetings in Bali, Indonesia of the IMF, World Bank and G20.

"As we look at trade issues there is no question that we want to make sure China is not doing competitive devaluations," Mnuchin told the FT.

The dollar fetched 112.11 yen in early Asian trade, down from 112.35 yen in New York and 113.00 yen in Tokyo late Wednesday.

Blue-chip exporters tumbled widely, with Olympus plunging 4.17 percent at 4,245 yen, Toyota off 3.07 percent at 6,552 yen, and Sony down 4.97 percent at 6,242 yen.