A man looks at his watch as he passes an electronic board displaying a graph of currency rates outside a brokerage in Tokyo.

Tokyo - Tokyo stocks closed 0.31 percent lower on Monday, with investors discouraged by drops on Wall Street last week, a higher yen and concerns over the European economy.

The benchmark Nikkei 225 index fell 48.61 points to finish at 15,474.50, while the Topix index of all first-section issues was down 0.40 percent, or 5.11 points, at 1,276.19.

Sentiment was weighed by concerns over how stricter sanctions on major energy supplier Russia would impact European economies and the bailout of a crisis-hit Portuguese bank, said Yoshihiro Okumura, general manager of research at Chibagin Asset Management.

Portugal's central bank announced late Sunday that the nation will inject 4.4 billion euros (R63 billion) into the Banco Espirito Santo (BES) amid fears of a catastrophic bank run.

“European risk is having an impact on the broader market,” Okumura told Dow Jones Newswires

In share trading, Sharp tumbled 2.77 percent to 315.0 yen after the struggling electronics maker said it had lost money in the three months to June.

Budget carrier Skymark rose 2.67 percent to 192 yen, turning up after the stock had lost more than one third of its value since a row with Airbus came to light last week.

Airbus has said it had cancelled a $2.2-billion (R23 billion) jet order from Skymark, even as the loss-making airline insisted it was still negotiating with the airplane manufacturer to “revise” the deal.

Nissan closed down 1.13 percent at 1,005.5 yen while Mitsubishi Motors slipped 0.51 percent to 1,158.0 yen, after a report in the Nikkei business daily said the two automakers would jointly develop a small electric vehicle.

In currency trade, the dollar bought 102.66 yen, down from 102.93 yen in Tokyo on Friday.

A stronger yen is bad for shares of Japanese exporters as it dents their profitability.

In New York on Friday, the Dow Jones Industrial Average lost 0.42 percent.

Investors took a cautious stance after Thursday's rout, which sent the blue-chip index tumbling more than 300 points, giving up all its gains for 2014. - Sapa-AFP