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Nikkei hits 3-1/2 month low on strong yen; posts fifth weekly drop

* Tokyo stocks join global sell-off

* Nikkei falls for fifth week

* Wall Street logs losses as U.S. political woes rattle investors

* Insurance, banks lead losses

TOKYO, Aug 18 (Reuters) - Japanese stocks fell to 3-1/2-month lows on Friday and posted a fifth weekly drop, hit by losses on Wall Street and a weaker dollar as doubts grow over whether President Donald Trump will be able to push through policies to boost U.S. economic growth.

The Nikkei ended down 1.2 percent at 19,470.41, its lowest close since May 2. For the week, it dropped 1.3 percent, falling for five straight weeks.

U.S. stocks sold off on Thursday, with the S&P 500 logging its biggest daily percentage drop in three months, as escalating worries about the Trump administration's ability to deliver on its economic promises rattled investors.

An attack in Spain added to the risk-averse mood, after a van mowed down crowds of tourists in Barcelona killing at least 13 people, with Islamic State claiming responsibility.

While the fiery rhetoric between Washington and Pyongyang has calmed down, concerns remain that tension could again flare up on the Korean peninsula.

Traders said the market will likely stay cautious, with the United States and South Korea planning joint military drills next week.

"Tensions between the U.S. and North Korea may rekindle, so investors are risk-averse," said Chihiro Ohta, general manager of investment research at SMBC Nikko Securities.

The dollar fell 0.3 percent to 109.31 yen, extending its 0.6 percent drop on Thursday.

Banks and financial shares underperformed, with the banking subindex down 1.4 percent and the insurance subindex losing 1.9 percent.

Mitsubishi UFJ Financial Group tumbled 2.0 percent and T&D Holdings dived 2.6 percent.

The broader Topix declined 1.1 percent to 1,597.36. (Reporting by Lisa Twaronite and Ayai Tomisawa; Editing by Sunil Nair)