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Tokyo stocks dive 3.33% by break on Fed stimulus move

Tokyo stocks tumbled more than three percent Thursday, sparked by worries over emerging markets as the Federal Reserve further scaled back its stimulus programme.

TOKYO: Tokyo stocks tumbled more than three percent Thursday, sparked by worries over emerging markets as the Federal Reserve further scaled back its stimulus programme.

The benchmark Nikkei-225 index slumped 3.33 per cent, or 511.53 points, to 14,872.38 by the break -- wiping out its 2.70 per cent gain Wednesday. The Topix index of all first-section shares fell 3.04 per cent, or 38.15 points, to 1,218.03.

"The turmoil in emerging markets does not look like it's close to dying down," Yoshihiro Okumura, general manager at Chibagin Asset Management, told Dow Jones Newswires.

"While the continuation of the Fed's tapering programme implies higher US interest rates, a stronger dollar and a weaker yen -- all of which are fundamentally positive for Japan stocks -- the 'risk-off' investor mood and jolt to the world's growth markets is trumping these facts."

The Fed said Wednesday it would reduce its monetary easing programme by US$10 billion a month to US$65 billion, following a similar move in December.

Investors took flight after the announcement, which stoked fears of a capital flight from emerging markets as dealers look for safer investments back home.

Fed policymakers made no mention of the emerging market woes, leaving investors with little comfort, analysts said.

"They could have said something like they would be 'watching the situation closely'," said Hirokazu Kabeya, senior strategist at Daiwa Securities.

"With that, the market atmosphere would be very different now."

The Fed's stimulus has been widely credited with buoying global equity markets and the latest move, though widely expected, may do little to stoke optimism among jittery investors.

US stocks slumped, with the Dow falling 1.15 per cent, the S&P 500 off 1.01 per cent and the Nasdaq down 1.14 per cent.

In Tokyo, Nintendo shares fell 3.49 per cent to 12,430 yen by Thursday's break, after initially bucking the morning market downturn.

The drop comes after the struggling Japanese gaming giant announced a share buyback plan and a pay cut for its president, following a dive in earnings. Nintendo is holding an analyst briefing Thursday morning to outline a new business strategy.

A string of Japanese firms are set to announce their nine-month earnings later Thursday including NEC, Toshiba and Nippon Steel & Sumitomo Metal.

In forex trade, the dollar was at 102.15 yen compared with 102.25 yen in New York and well down from the 103.30 yen in Asia earlier Wednesday.

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