The Nikkei stock index dropped nearly 400 points on Monday to mark its biggest fall in more than two months, the first trading day of 2014, as investors cashed in on strong year-end gains.
The 225-issue Nikkei Stock Average fell 382.43 points, or 2.35 percent, from Dec. 30 to close at 15,908.88. It is the first time in six years that the index has finished the first trading day of a year in minus territory, and its point fall on Monday was the biggest since Oct. 25.
The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 10.14 points, or 0.78 percent, lower at 1,292.15.
The Tokyo market opened on a weak note as market players locked in recent gains after the Nikkei surged 7.5 percent during a nine-day rally through Dec. 30 to its highest finish since November 2007. The Nikkei skyrocketed 57 percent in 2013, its biggest annual gain since 1972.
"A number of technical charts are sending a signal of market overheating so profit-taking took the upper hand," Hiroichi Nishi, assistant general manager of equity research at SMBC Nikko Securities Inc., said.
The U.S. dollar's fall to the lower 104 yen from the 105 yen range seen late last year also weighed on export-oriented shares. A stronger yen eats into their dollar earnings overseas when repatriated.
Trading remained sluggish throughout the day, with the Nikkei ending below the 16,000 threshold for the first time since Dec. 24.
Recent major advancers succumbed to selling in particular, with Fast Retailing, a heavily weighted Nikkei component, tumbling 2,500 yen, or 5.8 percent, to 40,900 yen. Another key Nikkei component Softbank slipped 320 yen, or 3.5 percent, to 8,880 yen. Toyota Motor dropped 120 yen, or 1.9 percent, to 6,300 yen after rising for the fourth straight day.
While high-prided large capitalization shares drew selling, incentive-backed small cap shares remained firm. Advancing issues outnumbered declining ones 906 to 761 on the First Section, while 108 finished unchanged.
"While traders shied away from large-cap issues, buying centered on mid- to small-cap shares" Hiroaki Hiwada, strategist at Toyo Securities Co. said, referring to rises in the Mothers market for start-up companies.
Fujikura Rubber shot up by the daily limit of 300 yen, or 29.4 percent, to 1,320 yen, remaining on its recent uptrend triggered by an announcement that a research team involving the company succeeded in a key experiment to develop a new type of battery using magnesium in sea water.
By sector, marine transport, mining and information and technology shares drew selling especially.
Trading volume on the main section came to 2,924.82 million shares, compared with 2,910.16 million shares on Dec. 30. Japan's financial markets had been closed since Dec. 31 for year-end and New Year holidays.