Tokyo stocks fell sharply Thursday, with the Nikkei index hitting a one-week closing low below the 10,000 line, on persistent jitters over the stalled U.S. debt talks and a firm yen.

The 225-issue Nikkei Stock Average dropped 145.84 points, or 1.45 percent, from Wednesday to 9,901.35. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 10.74 points, or 1.25 percent, to 848.37.

Thirty-two of the 33 sectors on the TSE lost ground, with the iron and steel sector leading decliners, followed by the oil and coal products and mining sectors. The electricity and gas sector was the sole gainer.

Stocks extended losses as investors took cues from the sharp decline of the Dow Jones Industrial Average to a one-month low in New York amid growing anxiety over the stalemate in talks to raise the U.S. debt ceiling with Tuesday's deadline looming, brokers said.

The Nikkei index temporarily fell below the 9,900 line in the afternoon, before slightly trimming losses just before the market close.

Takashi Hiroki, chief strategist at Monex Inc., said, "Dumping (on the U.S. debt woes) accelerated after the index breached the key support at slightly above 9,900," but the index may have hit the downside before the weekend.

With a strong yen against the U.S. dollar and the euro fanning worries about their impact on exporters' profits, exporter issues widely fell, and buying was confined to individual shares with solid earning results, brokers said.

Toshikazu Horiuchi, equity strategist at Cosmo Securities Co., said the dollar may continue to face pressure even past the August deadline for the U.S. debt talks.

"Although the debt ceiling issue is expected to be settled soon, how it will be settled is still unclear, and there is still the risk of a U.S. credit rating downgrade," he said.

Among exporters, Toyota Motor was down 70 yen, or 2.2 percent, to 3,185 yen, and Canon declined 75 yen, or 1.9 percent, to 3,795 yen.

The dollar weakened in the upper 77 yen zone at the market close, while the euro extended losses and fell to the upper 111 yen level.

Advantest plunged 104 yen, or 6.9 percent, to 1,400 yen on disappointing quarterly earning results, while Hitachi Construction Machinery jumped 64 yen, or 3.8 percent, to 1,745 yen after it revised its earning forecast upward.

On the First Section, declining stocks outnumbered advancing ones 1,288 to 278, with 98 others remaining unchanged.

Trading volume on the main section rose to 1,795.26 million shares from Wednesday's 1,702.16 million. Read More