TOKYO, Dec. 21 (Xinhua) -- Japan's benchmark Nikkei stocks index closed at a two-month low on Wednesday, following the new policy move of the Bank of Japan (BOJ) sending the yen higher against the U.S. dollar and underscoring concerns over the domestic economy.
The 225-issue Nikkei Stock Average dropped 180.31 points, or 0.68 percent, from Tuesday to close the day at 26,387.72, marking its lowest closing level since Oct. 13.
The broader Topix index, meanwhile, lost 12.27 points, or 0.64 percent, to finish at 1,893.32.
Market analysts here said the BOJ opting the previous day to raise the cap on long-term Japanese government bond yields was a move not expected until next year, despite other major central banks hiking their benchmark rates to tame global inflation.
As a result, the yield on the benchmark 10-year Japanese government bond increased 0.070 point from Tuesday's close to 0.480 percent, dealers here said.
This marked its highest in more than seven years, topping the 0.460 percent it reached right after the BOJ's announcement on Tuesday, they said.
"10-year yields looked low compared to yields for 30 and 40-year Japanese government bonds," Kazuhiko Sano, a strategist at Tokai Tokyo Securities, was quoted as saying.
"The 10-year yield could be pinned at 0.50 percent for the foreseeable future," he said.
The yield on five-year JGBs climbed 6.5 basis points to 0.235 percent, meanwhile.
The Japanese yen, for its part, was changing hands in the upper 131 zone versus the U.S. dollar in Tokyo, as compared to its leaping from the lower 137 zone on Tuesday afternoon and reaching 130.58 in New York overnight, its highest level since August, traders here highlighted.
The U.S. dollar was quoted at 131.75-78 yen compared with 131.66-76 yen in New York and 132.58-61 yen at 5 p.m. on Tuesday in Tokyo.
The euro, meanwhile, fetched 1.0632-0634 dollars and 140.09-13 yen against 1.0618-28 dollars and 139.84-94 yen in New York and 1.0611-0612 dollars and 140.70-74 yen in late Tuesday afternoon trade in Tokyo.
"The yen's slight weakening after hitting the 130 range shows that the market digested the BOJ's decision yesterday to some extent, prompting dip-buying in the stock market," Yutaka Miura, senior technical analyst at Mizuho Securities Co., was quoted as saying.
"But selling pressure remained strong because the yen's appreciation means exporters can no longer rely on the foreign exchange factor to boost their earnings," Miura said.
By the close of play, transportation equipment, electric appliance and real estate-linked issues comprised those that declined the most.
Among exporters losing ground on concerns over falling profits on a firmer yen when repatriated from overseas and less price-competitiveness in oversees markets, Panasonic Holdings dropped 3.7 percent, while Toyota Motor lost 2.0 percent, with the sub-index for automakers dropping 2.36 percent, the most of any of the 32 industry sub-indexes.
Real estate issues came under pressure, owing to concerns that increasing long-term interest rates could push mortgage rates higher and hurt demand.
As a result, Tokyu Fudosan Holdings relinquished 3.9 percent, while Mitsui Fudosan lost 3.8 percent.
The banking sector outperformed, however, jumping 2.6 percent, on hopes that rising interest rates will equate to larger profits.
Associated issues found favor, including Sumitomo Mitsui Financial Group leaping 4.1 percent, and Mitsubishi UFJ Financial Group jumping 3.9 percent by the close.
Issues that fell outpaced those that rose by 1,387 to 400, while 51 ended the day unchanged.
On the Prime Market on Wednesday, 1,779.60 million shares changed hands, dropping from Tuesday's volume of 1,843.92 million shares.
The turnover on the third trading day of the week came to 3,719.12 billion yen (28.24 billion U.S. dollars). ■