Tokyo stocks closed sharply lower Wednesday as the yen's appreciation against the U.S. dollar, and an overall risk off mood on concerns related to rising tensions on the Korean Peninsula, contributed to a dour market mood.

The 225-issue Nikkei Stock Average dropped 257.30 points, or 1.29 percent, from Tuesday to close the day at 19,738.71, marking its lowest closing level since May 31.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, dropped 17.42 points, or 1.07 percent, to finish at 1,617.90.

Metal products, warehousing and chemical-linked issues comprised those that declined the most by the close of play and the majority of the market's 33 sectors closed in negative territory.

On the First Section on Wednesday, falling issues trounced rising ones by 1,657 to 287 with 78 issues finishing the day unchanged.

Local traders said that the market became risk adverse following concerns that the Democratic People's Republic of Korea (DPRK) may step up its missile activity with some investors opting to square away positions before the DPRK observes its Liberation Day on Aug. 15.

Brokers here also said the Dow Jones Industrial Average coming to the end of a 10-day winning streak also weighed on the market mood, with the yen's appreciation against the U.S. dollar ensuring that the key export sector here lost ground, which tends to drag down the broader market.

On the main section on Wednesday 2,066.31 million shares changed hands, rising from Tuesday's volume of 1,652.36 million shares and the turnover on the third trading day of the week came to 2,697.6 billion yen (24.52 billion U.S. dollars).