Japan’s Nikkei share average dropped on Monday morning, with sentiment soured by a strong yen and weakness on Wall Street, while investors turned their focus to the US presidential debate.
The Nikkei fell 0.5 percent to 16,674.67 in mid-morning trade.
Traders said that most investors would be on the sidelines awaiting Monday evening’s (0100 GMT on Tuesday) U.S. presidential debate between Donald Trump and Hillary Clinton.
“There won’t likely be any outcome affecting the Japanese market directly, but investors are watching how the currency markets will move. Anything triggering fears for a strong yen trend is negative to stocks,” said Takuya Takahashi, a strategist at Daiwa Securities.
“If the popularity of Trump rises, uncertainty would be bigger to U.S. shares and the global financial market. But Clinton’s policies would not be particularly positive to Japanese stocks, either.”
Takahashi also noted that the ratification of the Trans-Pacific Partnership (TPP) pact – a trade agreement among 12 Pacific Rim countries including Japan – would be challenging, as both Clinton and Trump are opposed to the pact. It would be a positive catalyst for Japanese equities if ratified.
On Monday, exporters were sold as the dollar fell 0.2 percent to 100.800 yen. Honda Motor Co declined 1.6 percent and Advantest Corp tumbled 2.7 percent.
Some defensive stocks outperformed, with drugmakers Takeda Pharmaceutical Co rising 0.6 percent and Astellas Pharma advancing 0.4 percent and condiment maker Kikkoman Corp gaining 1.1 percent.
The broader Topix dropped 0.6 percent to 1,341.49 and the JPX-Nikkei Index 400 declined 0.6 percent to 12,027.28.