Japan's Nikkei slides as US tariffs, stronger yen unsettle market

By Brigid Riley

TOKYO (Reuters) - Japan's Nikkei fell on Tuesday, as markets were jittery about a trade war as fresh U.S. tariffs came into effect, while a stronger yen added to investors' concerns.

U.S. President Donald Trump's new 25% tariffs on imports from Mexico and Canada took effect, along with a doubling of duties on Chinese goods to 20%, launching new trade conflicts with the top three U.S. trading partners.

The Nikkei dropped as much as 2.6% to its lowest level since September 18, before paring losses to finish down 1.2% at 37,331.18. The broader Topix closed 0.7% lower at 2,710.18.

Automakers declined after yen rose to near its strongest since early December against the U.S. dollar, with Hino Motors dropping the most at 3.3%.

Trump on Monday said that he told leaders of Japan and China they cannot continue to reduce the value of their currencies as doing so would be unfair to the United States.

The sharp fall in equities was a "combination of the yen strengthening and fear of tariff policies, as well as the tech weakness since last week, all mixed together," said Naka Matsuzawa, chief macro strategist at Nomura Securities.

Concerns about U.S. growth may also be at play, he added.

Chip-testing equipment maker Advantest shed 4.3% after U.S. chip giant Nvidia, which Advantest counts as a customer, fell overnight. AI-focused startup investor SoftBank Group gave up 4.8%.

Among other Nikkei heavyweights, Uniqlo parent firm Fast Retailing fell 1.2%, while Seven & i Holdings slumped 6.9%.

Bucking the trend, Mitsubishi Heavy Industries rose 7.8%, was among defence-related shares to rally.

The Nikkei volatility index jumped to 31.6 points, a level last seen in early November following the U.S. presidential election, before settling at 27.2.

(Reporting by Brigid Riley; Editing by Rashmi Aich and Varun H K)