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Tokyo - Tokyo shares fell on Tuesday after Japan upgraded the crisis at a stricken nuclear plant to the maximum level on an international scale, putting it on par with Chernobyl.
The Nikkei 225 index lost 164.44 points, to 9 555.26. The Topix index lost 13.83 points, to 838.51.
"The headline news makes foreign investors think that the crisis is serious enough to encompass the Tokyo area," Kenichi Hirano, an operating officer at Tachibana Securities, told Dow Jones Newswires.
The yen soared on the news Japan had upgraded its assessment of the crisis at the crippled Fukushima Daiichi plant, sending exporter shares lower, dealers said.
"Japanese exporters are already being hit by parts shortages and a lack of electricity so they're not ready for a firmer yen," said Cosmo Securities strategist Toshikazu Horiuchi.
Major exporters closed down sharply, with Sony off 2.87% at ¥2 502 and Nikon dropping 3.30% to 1 610.
In another volatile session, shares in Tokyo Electric Power, the operator of the stricken plant, plunged 10% to ¥450.
Japan's nuclear safety agency raised the crisis level of the Fukushima Daiichi nuclear power plant accident from 5 to 7, the highest on the international scale and the same as Chernobyl in 1986.
Workers are battling to stabilise reactors whose cooling systems were knocked out by the March 11 earthquake and resulting tsunami.
The re-assessment from level five on the scale came as Japan was rocked by yet more powerful aftershocks from the 9.0 magnitude quake last month.
The 6.2 magnitude tremor hit 77 kilometres east of Tokyo on Tuesday and swayed buildings in the capital, temporarily shutting down subway services and halting bullet trains. Another 6.0 magnitude aftershock struck in the afternoon.
In a fresh setback, a fire broke out early on Tuesday morning at a battery unit outside a building at the No. 4 reactor, but was quickly extinguished and did not spread to other areas, Tepco said.
Cautious investors continued to gauge the emerging economic impact of the March 11 earthquake-tsunami disaster and the subsequent nuclear crisis.
On Monday the International Monetary Fund lowered its 2011 growth forecast for Japan, citing "large uncertainties" hanging over the world's third-biggest economy a month after the quake.
The IMF forecast Japan's economy would grow 1.4% in 2011 compared with an earlier forecast of 1.6% made before the March 11 earthquake and tsunami hit production and shattered supply chains.
Investors were also given a soft cue from Wall Street, which ended flat.
The US earnings season marked a weak start with shares in aluminium giant Alcoa falling in after-hours trading, as sales growth was weaker than expected.
