TOKYO, Sept 25 — Tokyo stocks ended 0.76 per cent lower today on concerns about a US budget standoff that threatens to shut down parts of the world’s biggest economy.

The benchmark Nikkei 225 index slipped 112.08 points to 14,620.53, while the Topix index of all first-section shares lost 0.31 per cent, or 3.72 points, to 1,211.15.

“As Japanese shares were overbought in recent trades, an ongoing correction was expected,” Yoshihiro Okumura, general manager for research at Chibagin Asset Management, told Dow Jones Newswires.

Naoki Fujiwara, fund manager at Shinkin Asset Management, added that positive factors including Tokyo’s winning bid to host the 2020 Olympics and possible corporate tax cuts “have already been factored in”.

The Nikkei has gained about 10 per cent in the past few weeks, but the rise has been capped by uncertainty over the US Federal Reserve’s plans for its stimulus programme.

The deadline for a budget deal is up on Monday and markets are worried that US politicians will not reach an agreement to avoid the shutdown of parts of the US economy.

Adding to the brewing crisis are Republicans’ demands that President Barack Obama impose cuts on his healthcare law in the budget before they agree to lift the country’s borrowing limit, which will be reached in mid-October.

Failure to lift the ceiling will mean the US is unable to service its debts and in turn lead to a default.

Tokyo Electron soared on news of a multi-billion dollar merger between the Japanese chip and panel giant and US-based Applied Materials. It shares jumped 13.19 per cent to 5,490 yen. Applied Materials rose about 9.0 per cent on Wall Street.

Bathroom fixtures firm Lixil Group slipped 1.12 per cent to 2,020 yen after losing more than six per cent Yesterday following a report it is in advanced talks to buy Germany’s Grohe for more than US$4 billion (RM12.8 billion).

Automaker Honda slipped 0.13 per cent to 3,835 yen, rival Toyota was up 0.46 per cent at 6,470 yen and Sony was down 0.42 per cent at 2,088 yen.

The dollar changed hands at 98.61 yen, from 98.74 yen in New York yesterday. — AFP