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Tokyo stocks close 1.51% lower

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TOKYO, Nov 8 AFP

November 08 2012, 6:53PM

Tokyo stocks have lost 1.51 per cent after a Wall Street sell-off as US President Barack Obama's re-election sparked fears over Washington's fiscal deadlock, while the strong yen hurt exporters.

The benchmark Nikkei 225 index at the Tokyo Stock Exchange on Thursday closed down 135.74 points at 8,837.15, while the broader Topix index of all first-section shares declined 1.39 per cent, or 10.36 points, to 735.35.

Tokyo's decline came after US stocks plunged on Wednesday with the blue-chip Dow diving 2.36 per cent to finish at 12,932.73, its first close below 13,000 in three months.

Obama's Republican challenger Mitt Romney had been favoured by markets for his stance on lower tax and less regulation.

But a bigger worry is that a still-divided congress could again lead to deadlock on fiscal reforms, allowing the so-called "fiscal cliff" package of spending cuts and tax hikes to take effect on January 1.

If congress fails to agree how to cut spending over the medium term, there will be automatic deep spending cuts that could tip the United States back into recession in a major blow for the slowing global economy.

"Immediately the re-election parties ended, markets returned to the daunting issue of the US fiscal cliff," CLSA equity strategist Nicholas Smith told Dow Jones Newswires.

Also weighing on sentiment was the European Union on Wednesday cutting its economic growth forecast for the region - a key market for Japanese exports - and worries about the impact of economic woes on powerhouse Germany.

New Japanese data on Thursday pointed to more worrying signs for the world's third-largest economy as the surplus in September's current account, the broadest measure of Japan's international trade, came in lower-than-expected.

Japanese machinery orders, seen as a leading indicator of corporate capital spending and watched for movements that may reflect the broader economic outlook, unexpectedly tumbled 4.3 per cent in September.

In Tokyo trade, the stronger yen weighed on exporters, with Canon falling 2.52 per cent to Y2,505, while Sony was down 2.95 per cent to Y887 and Toyota lost 2.62 per cent at Y3,155.

On forex markets, the dollar was weaker at Y79.86, from Y79.96 in US trade, while the euro bought $US1.2760 and Y101.94 in Tokyo trade, from $US1.2767 and Y102.09.