TOKYO - Tokyo stocks dropped on Monday morning as lingering worries about the war of words between the United States and North Korea offset better-than-expected Japanese economic growth.
The market headed south as investors returned from a three-day holiday weekend in Japan after geopolitical tensions dented overseas markets on Friday.
CIA director Mike Pompeo tried to lower the temperature at the weekend, offering assurances there was "nothing imminent" in the escalating stand-off between Washington and Pyongyang.
That came after US president Donald Trump hinted at military action over Pyongyang's threat to launch missiles towards the Pacific island of Guam, a US territory.
Japanese shares "are likely to follow US shares' slump" last week, Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute, told Bloomberg News.
But "I don't think there's any imminent danger over the situation between the US and North Korea," he added.
Still, with joint South Korean–US military exercises scheduled and North Korea celebrating "Liberation Day" Tuesday, volatility could return to markets, analysts said.
"The market is in a 'risk-off' mood, and falls are likely particularly during the early part of this week," Okasan Online Securities said in a commentary.
Tokyo's benchmark Nikkei 225 index lost 0.84 percent, or 164.76 points, to sit at 19,564.98 by the lunch break, while the broader Topix index of all first-section issues fell 0.82 percent, or 13.30 points, to 1,603.95.
Investors largely shrugged off government data showing Japan's economy grew a forecast-beating 1.0 percent in the second quarter to mark the longest economic expansion in more than a decade.
Calculated on an annualised basis, growth came in at a blistering 4.0 percent, according to the figures released by the Cabinet Office.
Among major Tokyo shares, Uniqlo operator Fast Retailing fell 1.88 percent to 31,870 yen while telecom giant SoftBank, another market heavyweight, dropped 0.95 percent to 8,669 yen.
Automaker Toyota fell 0.88 percent to 6,220 yen and Sony lost 1.45 percent to end the morning at 4,275 yen.
In forex trading, the dollar bought 109.37 yen, edging up from 109.11 yen in New York on Friday, but still sharply lower than 109.99 yen in Tokyo on Thursday.