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Tokyo: Shares drop on Trump trade row worries

[TOKYO] Tokyo shares slumped Friday after US President Donald Trump vowed to impose steep tariffs on steel and aluminium imports, reviving fears of a trade war.

Investors also grew increasingly wary about the yen's rise against the US dollar, which weighs on Japanese exporters.

After Trump's comments sent Wall Street shares tumbling, the benchmark Nikkei 225 index gave up 2.5 per cent, or 542.83 points to 21,181.64, marking a fall of 3.25 per cent over the week.

The broader Topix index lost 1.83 per cent, or 31.86 points, to 1,708.34 shedding 2.96 per cent since last Friday.

The losses came as investors were already on edge over the prospect of higher interest rates before Mr Trump's latest trade move.

Mr Trump, at a meeting with American steel and aluminium producers, announced that next week he will sign off on measures designed to protect US companies.

US stocks sold off decisively on the news, with all three main indexes ending sharply lower on worries that tariffs will exacerbate inflation and prompt retaliatory moves by trading partners.

The market feared Mr Trump may further aggravate tense US-China trade relations and sent the US dollar to 105.76 yen in Tokyo from 106.25 yen in New York.

"The Tokyo market has taken over the negative sentiment from New York," said Hikaru Sato, senior technical analyst at Daiwa Securities.

The market found support as the Nikkei index approached the psychologically important 21,000 level, said SMBC Nikko Securities in a note.

"But it was difficult to shake off the global 'risk-off' sentiment, and the market's ability to bounce back from the bottom was fragile," the brokerage wrote.

Tokyo traders largely ignored the improvement in Japan's unemployment rate - it hit the lowest level since April 1993 - announced before the market opened.

Among major shares, leading Japanese steelmaker Nippon Steel & Sumitomo Metal plunged 3.81 per cent to 2,421 yen, while its smaller rival JFE Holdings dropped 2.8 per cent to 2,344.5 yen.

Toyota fell 2.37 per cent to 6,916 yen, while Nissan slipped 1.38 per cent to 1,105 yen and Honda lost 3.78 per cent to 3,686 yen.

Kyocera dropped 2.51 per cent to 6,067 yen following reports that the electronic components maker plans to raise investment to 100 billion yen (S$1.24 million) for the next fiscal year.