Summary Tsipras called a surprise July 5 referendum on the creditors' latest reform demand
TOKYO (AFP) - Tokyo stocks plunged 1.78 percent by the break, with investors running to the sidelines on fears of a Greek default, which has also pushed up the yen.
The Nikkei 225 index at the Tokyo Stock Exchange fell 368.81 points to 20,337.34, while the Topix index of all first-section issues was down 1.70 percent, or 28.41 points, at 1,638.62.
Greek Prime Minister Alexis Tsipras broke off deadlocked bailout talks at the weekend fuelling speculation that Athens was headed for financial collapse and a possibly messy exit from the euro.
Tsipras called a surprise July 5 referendum on the creditors latest reform demand in return for a financial rescue.
"Carrying out a referendum buys the Greek side some time. Digesting the worst-possible scenario of a Greek default, global stock markets could fall one to two percent today," said Mitsuo Shimizu, deputy general manager at Japan Asia Securities Group.
"Investors will initially evoke the Lehman crisis and wind-down long positions to take risk off the table," he told Bloomberg News, referring to a global turmoil that followed the 2008 collapse of Lehman Brothers.
Tokyo was the first major market to react to the weekend Greek move, with the benchmark index falling more than 2 percent in opening trade.
The fall was within market expectations, said Hirokazu Kabeya, senior strategist at Daiwa Securities.
"The first reaction wasn t extreme... I d say a drop of this extent was well anticipated," he said.
But Kabeya added "there are high chances that the Greece situation will develop rapidly in the run-up to June 30" when a massive Greek debt repayment to the IMF is due.
"There could also be developments before the July 5 referendum," making investors stay on alert, he said.
Tokyo traders were also waiting to see how the European and US markets would react Monday, he said.
Kabeya said China s weekend interest rate cut, following the recent plunges in Shanghai stocks, would help "ease" the market strain.
"If we say the Greek move was a negative surprise, China s move was a positive surprise," he said.
China s central bank said Saturday it would again reduce interest rates by 25 basis points, its fourth such cut since November as it tries to boost growth.
The yen, considered a safe haven in times of financial turmoil, strengthened -- a negative for Japanese exporters, whose products abroad become more expensive.
The euro tumbled to 135.57 yen from 138.26 yen in New York while the dollar fell to 123.15 yen from 123.89 yen.
In Tokyo share trading, exporters were broadly lower, with Canon down 2.26 percent at 3,987 yen and Sony declining 2.20 percent to 3,793 yen.
