TOKYO, March 20 (Xinhua) -- Japan's benchmark Nikkei stock index closed at a two-month low on Monday amid heightened concerns over further contagion after banking failures in the United States affected a major European lender as well as major stock markets.
The 225-issue Nikkei Stock Average dropped 388.12 points, or 1.42 percent, from Friday to close the day at 26,945.67.
The broader Topix index, meanwhile, dropped 30.12 points, or 1.54 percent, to finish at 1,929.30.
Dealers here said that investors switched out of riskier assets like stocks and into perceived safe havens including the yen, which drove its price up versus the U.S. dollar, amid concerns over a potentially faltering global financial system.
A strong yen versus its major counterparts negatively impacts domestic exporter issues whose firms rely on a weak yen to boost profits when repatriated from overseas and enhance price-competitiveness in foreign markets, analysts explained.
The risk-averse mood added by local brokers on Monday continued in part by Wall Street's retreat late last week, as moves to mitigate the fallout from the collapse of two U.S. lenders failed to calm investors' fears that the crisis could widen and hit the global banking sector.
Market strategists also said that along with concerns over other U.S. regional banks' stability, Swiss banking giant UBS Group AG's acquisition of Credit Suisse had only served to deepen concerns about the financial crisis spreading further in Europe and beyond.
"I had thought the news about rescue for Credit Suisse would be positive for the market, but it fell deeper than I expected," said Shigetoshi Kamada, general manager at the research department at Tachibana Securities.
"Global investors are staying away from risk assets right now so the Japanese market declines in line with that trend," Kamada said.
Analysts here concurred, with head of investment research at SMBC Trust Bank Masahiro Yamaguchi stating that, "Investors were still wary that other financial institutions could be heading for bankruptcy in the same way as some did recently."
Banking shares among Monday's selloff included Mizuho Financial Group falling 2.3 percent and fellow megabank Mitsubishi UFJ Financial Group's sliding 1.8 percent.
Sumitomo Mitsui Financial Group, for its part, dropped 1.7 percent by the close.
Dragging the broader market lower, Nikkei heavyweights came under selling pressure, with Fast Retailing, operator of the Uniqlo clothing chain, retreating 2.1 percent, while chip-manufacturing equipment maker Tokyo Electron slumped 2.6 percent.
Among exporters losing ground on the yen's rise were Mazda Motor reversing 1.4 percent and Nissan Motor skidding down 1.9 percent.
By the close of play, marine transportation, warehousing and harbor transportation service, and real estate issues comprised those that lost the most.
The turnover on the first trading day of the week came to 2,976.44 billion yen (22.69 billion U.S. dollars). ■