LEAD: Nikkei falls sharply as Fed rate hike jitters drown early gains.
(EDS: ADDING DETAILS AND PRICES)
Tokyo stocks fell sharply Friday, with initial gains from a weaker yen surrendered as investors became increasingly jittery while awaiting Wall Street's response later in the day to the U.S. Federal Reserve's move to raise its discount rate, which also dragged down commodity prices as well as other Asian equity markets.
After choppy morning trading in and out of positive territory, the 225-issue Nikkei Stock Average expanded losses in the afternoon, ending down 212.11 points, or 2.05 percent, from Thursday's two-week closing high at 10,123.58. The broader Topix index of all First Section issues on the Tokyo Stock Exchange lost 15.65 points, or 1.73 percent, to 889.08.
All of the TSE's 33 industrial sectors lost ground, led by real estate, construction and consumer finance. Resource-linked shares such as shippers, steelmakers and miners were also among the top decliners.
The Fed surprised markets after closing on Thursday by saying it will raise the interest rate charged on emergency loans to banks to 0.75 percent from 0.5 percent, effective Friday. The move pushed the dollar toward the 92 yen line, lending some support to Japanese exporters at the outset.
''With the yen weakening in the currency market, normally we would have seen more positive stock moves,'' said Yumi Nishimura, a senior equity market analyst at Daiwa Securities Capital Markets Co. ''But the discount rate hike, while not exactly credit tightening in this case, is seen as a first step en route to a U.S. exit strategy.''
Selling pressure in Tokyo picked up from late morning trading on falling U.S. stock index futures and commodity prices. Sharp losses in other Asian markets such as Hong Kong further soured the mood, brokers said.
''With speculation that the dollar will rise further in light of the rate hike, investors now fear equities and commodities will be unloaded for squaring positions as the dollar is bought back in a reversal of the dollar-carry trade,'' said Tsuyoshi Segawa, an equity strategist at Mizuho Securities Co.
Segawa said investors are waiting to see how Wall Street will respond later Friday to the Fed's move, as well as for Shanghai and other mainland Chinese markets to reopen Monday after the Lunar New Year holidays to determine the impact of Beijing's recent announcement of credit tightening.
On the First Section, declining issues overwhelmed advancing issues 1,426 to 162, with 91 others remaining unchanged.
Struggling Japan Airlines ended its last trading day on the Tokyo bourse at 1 yen, unchanged since Feb. 2. The stock will be officially delisted from the TSE on Saturday as a 100 percent equity reduction is part of a government-backed rehabilitation plan for the carrier.
Toyota Motor, the day's value leader, lost 60 yen, or about 2 percent, to 3,300 yen on news reports it will shut down production at a British plant for two weeks next month.
Steelmaker JFE Holdings fell 65 yen, or about 2 percent, to 3,165 yen, while shipper Nippon Yusen slipped about 3 percent.
Even blue-chip exporters that initially advanced on the stronger dollar ended by surrendering gains. Sony was down over 1 percent and Nissan Motor over 2 percent.
Banks slumped in response to the Fed move, with volume leader Mizuho Financial Group losing 5 yen, or almost 3 percent, to 171 yen.
Among the few issues bucking the trend, Isuzu Motors gained 3 yen, or over 1 percent, to 218 yen, after the Nikkei business daily reported that the automaker and Hino Motors Ltd. have jointly developed a system for large trucks to cut exhaust emissions.
Trading volume on the main section came to 1,833.13 million shares, up from Thursday's 1,658.04 million.
The TSE's Second Section index was down 8.66 points, or 0.42 percent, to 2,074.19 on a volume of 22.93 million shares. On the Osaka Securities Exchange, the near-term March Nikkei 225 index futures contract was down 190 points to 10,140.