 "Nikkei drops on China worries")
Japan's Nikkei share average fell on Monday in choppy trade as worries about Chinese economic and financial stability soured investor sentiment, dragging down China-related stocks such as construction equipment makers and some exporters.
The benchmark Nikkei, which climbed as much as 1.5% early in the session, ended the day down 1.3% at 13,062.78.
Of 33 Topix subsectors, 25 were lower, with China-related stocks have the largest declines.
The Nikkei China 50 index fell 1.9%. Komatsu Ltd dropped 4.6% and Hitachi Construction Machinery Co by 3.7%. Fanuc Corp skidded 2.3% and Nissan Motor Co slid 3.4%.
Early on Monday, the Nikkei rose, supported by a weak yen. But a sell-off in other Asian markets, which were in oversold territory, erased the gains.
China bank shares led the downward spiral after official news reports at the weekend suggested Beijing would continue to keep monetary policy tight.
In the mid-morning, "the Chinese market changed the mood completely. The Nikkei gave up its earlier gains immediately after the Chinese market opened," said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo.
"Global markets have just started pricing in the end of China's high-growth period and investors are backing away from emerging markets," added Okazawa.
The Topix dropped 0.9% to 1,089.64 in thin trade, with only 1.63 billion shares changing hands, the lowest level since mid-December.
Analysts said that as the Nikkei has corrected to a comfortable level after dipping below the 13,000 mark for several times over the past few weeks, sharp selling is unexpected in the coming days. But volatility still exists as such investors as hedge funds continue to take short-term positions over different asset classes, they added.
"It's not just about a co-relation between Japanese stocks and the yen anymore. Investors are monitoring US futures' moves during Asian trading hours," said Hiroyuki Fukunaga, the chief executive of Investrust, adding that investors who invest in risky assets globally are mainly interested in buying industrialised nations' stocks, such as US and Japanese ones.
"The Nikkei's recent correction has brought its valuation closer to the Dow Jones Industrial Average's valuation. When US futures are lower, Japanese shares are likely to fall, so we need to monitor US futures as well," Fukunaga said.
The Nikkei's trading at 12.4 times its expected earnings, while the Dow Jones Industrial Average is trading at 12.1 times, according to Thomson Reuters StarMine.
The dollar last traded at 98.46 yen after earlier touching 98.72 yen, its highest since June 11.
Some exporters rose, with Tokyo Electron Ltd rup 2.4% and Advantest Corp 2.8%.
SoftBank Corp also bucked weakness, rising 0.7% after CEO Masayoshi Son said on Friday he was confident his company's acquisition of Sprint Nextel Corp would be completed in early July after rival bidder Dish Network Corp bowed out.
Separately, Nomura Securities raised SoftBank's target price to 6,430 yen from 6,030 yen, citing the company's stake rise in Alibaba Group Holding and its upward revision in earnings forecast for internet business Yahoo Japan.