Japan's Nikkei average slid 2.5 per cent to its lowest close in two months today, dragged down by exporters such as Honda Motor on a sharply stronger yen.
The benchmark Nikkei fell 256.46 points to 10,009.52, its lowest close since late July. It also hit a two-month intraday low of 9,971.05. The broader Topix shed 2.2 per cent to 902.84.
The yen surged to an eight-month high against the dollar as Japanese officials waved off any plans to stem the currency's rise, driving the Nikkei down more than 2 per cent and sparking a broad retreat in risky assets.
The yen's jump against the dollar has it poised to make a run at the 13-year peak of 87.10 struck earlier in the year, with the rise through levels that Japan's big exporters had planned for this financial year hitting their shares.
The Japanese currency's climbed as senior officials again made clear they were not considering intervention to stem the rise at this point, with Finance Minister Hirohisa Fujii telling Dow Jones Newswires that the rise was "not abnormal".
Fujii later said yen moves were becoming one-sided and stable moves were desired, but market players were more focused on the hands-off aspect of his remarks.
Those comments reinforced the perception that the new ruling coalition is taking a different tack on currency policy than its predecessor and that Japan is no longer as trigger-happy as it once was, having spent about $400 billion to protect its fragile economic recovery in 2003 and 2004.
The Nikkei share average shed 2.4 per cent in morning trade to hit a two-month low and briefly fell below the 10,000 line. Among exporters, Honda Motors fell 5.3 per cent and electronic parts maker Kyocera Corp lost 2.6 per cent - among the biggest drags on the index.
The dollar fell as far as 88.23 yen on trading platform EBS before trimming losses to 89.33 yen, down 0.3 per cent on the day. The yen staged broad gains, with the euro down 1.1 per cent at 130.25 yen and sterling shedding 1.4 per cent to 141.10 yen.
Other Asian equity markets also retreated, but losses were smaller than those in Japan. The MSCI benchmark of Asia-Pacific shares outside Japan fell 1.4 per cent. South Korea's KOSPI index was down 1 per cent, while Taiwan's TAIEX dipped 0.9 per cent.
Some foreign investors were also pulling funds out of Asian stock markets before quarter-end, partially reversing some of the heavy buying that has taken place over the past six months on bets favouring the region's growth prospects.
Foreign investors were sellers for a third consecutive session in South Korea today.
Weaker-than-forecast reading of US housing sales and durable goods orders on Friday pushed the US S&P 500 index down 0.6 per cent on Friday. S&P futures were down 0.3 per cent in Asia trade.
Commodity prices also came under pressure. US crude oil shed 43 cents to $65.59, extending last week's 8.4 per cent slide after data showing a build-up of US inventories raised worries about the strength of demand.
Gold prices dipped 70 cents to $990.25, partly as the dollar staged a broad rebound despite its losses against the yen.
Reuters