Tokyo stocks open 1.74% lower after US slump

Tokyo stocks opened down 1.74 percent on Friday after an overnight slump on Wall Street driven by fears that tighter US monetary policy is on the horizon.

The benchmark Nikkei 225 index slipped 226.71 points to 12,787.87 at the start.

Overnight, US shares posted their biggest one-day slide of the year as worries over China's economic slowdown and a possible end to the Federal Reserve's hefty stimulus policies sent global markets into a tailspin.

The Dow Jones Industrial Average lost nearly 354 points, or 2.3 percent, to 14,758.32. It was the blue-chip index's largest points loss since November 9, 2011.

European bourses also fell sharply.

"US shares had been advancing for so long -- almost without a serious pullback -- that it was almost about time we finally saw one," Kenichi Hirano, market adviser at Tachibana Securities, told Dow Jones Newswires.

"Japan stocks, on the other hand, have had most of the hot air already vented, leaving less freefall downside."

Investors were now reappraising their appetite for risk, "as we have seen illustrated in the weakness in emerging markets", Hirano said.

The dollar bought 97.15 yen in early Asian trade Friday, compared with 97.30 yen in Tokyo and 97.27 yen in New York late Thursday.

The euro traded at 128.46 yen in Asia compared with 128.83 yen, and was flat at $1.3223 in US trade.