(Updates closing prices)
By Kevin Buckland
TOKYO, Oct 14 (Reuters) - Japanese shares sank on
Tuesday after a long weekend, clocking their sharpest one-day
drop since April, as investors fretted over uncertainty
surrounding the country's next premier and persistent U.S.-China
trade tensions.
The Nikkei share average closed 2.58% lower at
46,847.32, while the broader Topix slid 2% to 3,133.99.
Japanese investors returning from a national holiday on
Monday faced a complex global backdrop, including a stronger yen
and a steep Wall Street sell-off on Friday.
While both saw partial reversals, market sentiment remained
fragile as U.S.-China trade tensions accelerated, with shifting
signals from U.S. President Donald Trump unsettling traders.
On balance, weaker U.S. stocks and a stronger yen since the
start of Japan's extended weekend weighed on the market, said
Maki Sawada, an equity strategist at Nomura Securities.
In addition, the initial euphoria from fiscal dove Sanae
Takaichi's election as leader of the Liberal Democratic Party at
the start of the month has faded after coalition partner Komeito
pulled support. This opened a small possibility of an opposition
party leader being elected prime minister by parliament later
this month. Local media say October 20 or October 21 are likely
dates for the vote.
The Nikkei struck a record high last week in the immediate
reaction to Takaichi's surprise victory but the shock exit of
Komeito has cast doubts over what happens next.
"The decline of the 'Takaichi trade' is one reason" for
weakness in Japanese stocks on Tuesday, Sawada said. "Political
uncertainty is weighing."
The Japanese yield curve also steepened on Tuesday, with
investors buying short-dated Japanese government bonds and
selling longer-dated securities as investors took stock of the
political flux.
Exporters, whose overseas revenue is crimped by a stronger
currency, dropped on Tuesday, with Toyota ( TM ) down 1.2%.
SoftBank Group slumped 6%, extending its pullback
from a record high on Thursday as the heavyweight startup
investor continued to retreat.
Elsewhere, Muji owner Ryohin Keikaku ( RYKKF ) surged more
than 13% following its earnings after the closing bell on
Friday, making it the Nikkei's top-performing stock.