Tokyo stocks have dived 3.32 per cent as the US dollar hit a one-month low against the yen ahead of a closely watched US Federal Reserve policy meeting.

The benchmark Nikkei 225 index, which lost nearly three per cent on Friday, gave up 468.85 points to 13,661.13 by the close on Monday, while the Topix index of all first-section shares dropped 3.31 per cent, or 38.61 points, to 1,128.45.

“Lukewarm earnings and a stronger yen are translating into a rapid mini-correction”, an equity trading director at a foreign brokerage said, adding that “nobody wants to catch a falling knife”.

The US dollar slumped to its lowest level against the yen since late June as investors await the US Fed’s policy meeting for clues about the future of its stimulus program.

The greenback fetched Y97.79 in Tokyo afternoon trade, against Y98.20 in New York on Friday.

A strong yen is bad for Japanese exporters as it makes their products less competitive abroad while eroding their repatriated income.

Japan’s corporate earnings season gets into full swing this week with mixed results so far.

“Some are good, some are bad; there isn’t much consistency, especially among the bellwether companies,” Hiroyuki Fukunaga, chief executive at Investrust, told Dow Jones Newswires.

“Combined with the weak dollar, it’s enough to turn potential buyers into sellers.”

Carmakers were stung by the stronger yen, with Honda falling 3.03 per cent to Y3,675 and Toyota losing 4.06 per cent to Y5,900.

Other exporters also lost ground, with Sony down 3.56 per cent at Y2,057.