Roundup: Tokyo stocks tumble as Greece nears default, yen strengthens

Tokyo stocks plunged Monday and the yen strengthened as investors feared Athens would default on an upcoming repayment and fled to safer havens like currency.

Concerns grew that the debt-plagued nation under Greek Prime Minister Alexis Tsipras may be on its way to financially imploding and ultimately a very chaotic exit from the region's single currency euro.

The 225-issue Nikkei Stock Average dropped 596.20 points, marking its biggest points drop this year, or 2.88 percent from Friday to end the day at 20.109.95, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 42.21 points, or 2.53 percent, to close the day at 1,624.82.

Local brokers said that trading got off to a wholly negative start following Tsipras' comments made over the weekend in Athens, stating that the country's bailout terms with its various creditors would be a matter of a national referendum slated for July 5.

Hence, eurozone leaders were unable to seek a longer-term solution for the debt-plagued country beyond Tuesday, as global stock, equities and currency markets are all taking a massive hit.

Some market players said that a risk on mood would continue in the near term to see if Greece actually defaults on its 1.6 billion euros payment due to the International Monetary Fund (IMF) on Tuesday, with a circumspect mood continuing to see how both the U.S. and European markets react overnight. "The referendum move was a development no one could have predicted. Greece is now widely expected to default on a repayment of 1.6 billion euros due to the International Monetary Fund on Tuesday," said Maki Sawada at Nomura Securities Co.'s investment research department.

"Investors are selling Tokyo stocks amid risk aversion, and will closely watch European and U.S. markets' reaction tonight and keep their eyes on opinion polls ahead of the referendum for hints on whether Greece will end up exiting the eurozone," said Sawada.

Other brokers said, however, that for the time being Japan would be cushioned from the blow, but in times of geo-economic turmoil investors often switch out of risky assets like stocks and into safer havens like certain currencies and gold for example. In this case, investors fled to the yen, which pushes its price up against and affects the competitiveness of exporter-related stocks who rely on a weaker yen to shift more products overseas and then capitalize when the profits are repatriated here.

"The Greek problem has almost no direct impact on Japan, but as investors take risk off the table we're seeing some currency- related effects. If Greece leaves the euro zone, that will be an additional level of shock, but it's hard to say if markets have priced in too much or if the adjustment is already over," said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co.

Further contributing to a dour market mood on the first trading day of the week, was data released by the government before the start of play, showing that Japan's industrial production had slumped more than median analysts' expectations in May, owing to slowing transport equipment and automobile production.

Output fell 2.2 percent from April, when it increased 1.2 percent, the trade ministry said on Monday. Economists had forecast a 0.8 percent decline. Retail sales rose 1.7 percent from the previous month, however, which was more than estimated.

"Japan's economic growth will probably slow considerably in the second quarter, reflecting weak exports and production. Weakness in exports and sluggish car sales in the domestic market are reflected to the decline in production in May, said Yuichi Kodama, an economist at Meiji Yasuda Life Insurance Co. "I'm a bit worried as industrial production fell below recent levels," added Yamashita.

With the euro tumbling to 134.84 yen from 138.26 yen logged in New York and the greenback changing hands at 122.44 yen from 123. 89 yen, exporters came under pressure Monday and consumer electronics behemoth Sony dropped 2.72 percent to 3,773 yen, while Canon retreated 2.8 percent to 3,965 yen.

Among automakers, Mazda Motor reversed 4.5 percent to 2,384 yen and Honda Motor decelerated 2.7 percent to 3,927 yen, as the automaker is still being hampered by a global airbag recall.

Issues with a wide exposure to eurozone markets also lost ground, with game and console maker Nintendo falling 3.6 percent, while Makita Corp., an industrial parts maker, relinquished 4.1 percent.

Financial, insurance and real estate issues also charted a downward trajectory, with top banks Mizuho losing 3.6 percent, while Mitsubishi UFJ Financial Group Inc. fell 3.2 percent. Dai- ichi Life Insurance dropped 3.5 percent, Daiwa Securities Group also fell 3.5 percent, while Mitsui Fudosan also closed the day in negative territory, dropping 2.6 percent.

The market's large cap stocks also contributed to dragging the index down, with Fast Retailing, owner and operator of the Uniqlo chain of high street apparel stores, closing down 3 percent, while SoftBank dropped 2.4 percent, and industrial robotics maker Fanuc lost 2.7 percent.

Trading volume on the Tokyo Stock Exchange's main section rose to 2.53 billion shares on Monday, up from Friday's volume of 2.19 billion shares, with declining issues pummeling advancing ones by 1,821 to 56. Endi