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Tokyo's Nikkei index drops 1.65% after Greek 'No' vote

Tokyo's benchmark stock index dropped 1.65 percent at the start on Monday, the first major market to open after Greeks voted to reject austerity measures demanded by the cash-strapped nation's creditors.

The Nikkei 225 at the Tokyo Stock Exchange fell 339.64 points to 20,200.15 in the first few minutes of trading, as investors digested the news which boosts the chances of Greece tumbling out of the eurozone.

European leaders reacted with a mix of dismay and caution Sunday after Greek voters defied their warnings of a possible "Grexit" by saying a resounding "No" to creditors' harsh bailout terms.

Jittery investors fled to the yen -- a safe haven during times of turmoil -- as the vote sparked uncertainty about what happens next following months of fruitless talks between Greece and its EU-IMF creditors before Sunday's hastily arranged referendum.

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A stronger yen is a negative for Tokyo stocks as it dents the profitability of major Japanese exporters such as Sony and Toyota.

On forex markets, the dollar slipped to 122.58 yen from 123.05 yen on Friday while the euro was also lower at 134.91 yen from 136.31 yen.

But the single currency held up against the dollar, after dropping in the immediate wake of the vote. It was at $1.1014, ticking up from $1.0963 soon after early results of the bailout reforms vote were out.

Eurozone nations will hold an emergency summit on Tuesday to discuss the result.

The Eurogroup last month rejected Greece's appeal for an extension to its 240-billion-euro international bailout after the Greek premier called the referendum, leaving Athens unable to pay a huge International Monetary Fund bill.

Japan has few economic links to Greece, but fears about the negative impact on sentiment weighed on the market as investors look to the opening of European exchanges later in the day.

"The door to further negotiations is not shut yet and (many players) are taking a wait-and-see stance," said Toshihiko Matsuno, senior strategist at SMBC Friend Securities in Tokyo.

"The impact of the 'No' vote was no bigger or even less than the shock when talks broke off between Greece and its creditors the preceding weekend.

"(But) new problems could arise if geopolitical risks, such as Greece moving closer to Russia, grow. But it will take more time to see how things develop."

Chris Green, director of economics and strategy at First NZ Capital in Auckland, told Bloomberg News: "There is now going to be a period of market uncertainty as we transition through the what-next phase. There'll be a couple of days of head scratching and trying to assess what the next political moves will be."

mis-pb/mtp